Spain on Its Way to Become Top Producer and Supplier of Energy from Renewables

The potential given by nature and the continuous work to improve the conditions for investment in renewable energy sources put Spain high on the map of investors who are interested in investing in the energy transition. What investors are most interested in is risk and return on capital, and Spain, according to some analysts, offers high returns for investors. Although renewable energy is a sector that from an investment point of view is seen as a kind of “El Dorado” of the 21st century, in addition to the potential, there are always certain risks as with any investment.

The energy crisis that hit the world as a result of the war in Ukraine has further fueled interest in investing in energy transitions and renewable energy sources. Spain with its natural potential that is still attractive to investors can make the country a leader in this sector. According to the analysis, the renewable energy sector in the European Union will be consolidated in the medium term and many of the fossil fuel companies will transition to the renewable energy sector, merging with the electricity supply companies.

The process of a complete transformation of the companies in the energy sector is inevitable in the entire process of the energy transition. Major mergers and transformations of energy companies, along with the implementation of new operating models are already underway. This further puts pressure on smaller players in the energy market, who if they want to position themselves in the market of renewable energy sources, will have to invest and take risks.

For Spain, renewable energy and full utilization of natural potential, especially the sun and wind, are not just a matter of attracting investment in the country and creating greater energy independence. The development of this sector is also an opportunity for greater social inclusion in less developed regions.

Spain can become the largest producer and supplier of energy from renewable sources. According to an analysis, one euro invested in Spain in renewable energy sources offers a 35% higher profit margin than any other country in the EU. An additional reason for investing in this sector is the estimate that investments in renewable energy sources will bring savings to the EU economy of 254.3 billion euros by 2050.

To speed up this process, the Spanish government announced late last year a 6.9 billion-euro investment in renewable energy. According to the announcements, these funds will be channeled into almost all segments of this sector. According to expectations, these investments should attract additional 9.45 billion euros of private capital in the sector, which would overcome the stagnation in investments that occurred during 2020 due to the health crisis.

Spain plans to generate 74% of its energy from renewable energy sources by 2030. According to the data, the country currently produces 121,350 GWh or 46.7% of total production.

There is great interest in investing in renewable energy sources in the capital markets as well, according to SP Global. Spanish energy conglomerate Accsonia SA managed to raise 1.5 billion euros through IPO and 85% of investors are outside Spain. More takeovers of energy companies investing in the country in renewable energy sources are expected, as well as raising fresh capital through IPOs. Large funds are also interested in investing in renewable energy sources, such is the case with the large UK pension fund Universities Superannuation Scheme Ltd. The fund bought 50% of Bruc Energy SLU for 225m euros, an investment fund that invests in renewable energy in Spain and Japan.

There is no doubt that this trend in Spain is a signal to investors and a trend that should be used. However, in order to use the potential of this trend, it is inevitable that the government’s measures to improve the business climate in this sector will continue. Although the potential is great and investors have a strong interest in investing, the measures which have been taken by the government to retroactively reduce tariffs on renewable energy sources create uncertainty for investor risk assessment. To harness Spain’s potential, which could make the country a leader in the Union in renewable energy, institutional support and the creation of a predictable investment framework are essential.

To learn more about Spain’s journey to energy transition read this article.