Europe’s transition to renewable energy is one of the goals towards which Spain has made significant progress in recent years. An increasing number of experts believe that green growth represents a major economic opportunity for Europe: as well as contributing a significant share of countries’ GDP, it helps combat global warming and improve people’s quality of life.
Current state of renewable energy in Spain
According to Spain’s Ministry of Industry, Tourism and Trade, the renewable energy sources that currently contribute most to energy production in Spain are wind power (51%), hydropower (36%) and solar energy (8%).
This is mainly due to increased investment in wind and solar technology, as well as higher hydropower generation, which played an important role in 2020. The strong momentum of the last two years has placed
These advances reflect Spain’s commitment to renewable energy, which continued to grow in 2021, when more than half of all domestic energy production was already generated using these technologies.
Solar and wind power in Spain
According to the Spanish Photovoltaic Union (UNEF), Spain ranked first in Europe in 2019 for newly installed solar photovoltaic capacity, creating jobs and improving the competitiveness of the sector.
UNEF regards the sector as a driver of the country’s economic recovery and believes that this revival should form part of a “green transition process”. Spain was also the leading European solar PV market in 2019 and ranked sixth worldwide.
Wind power, meanwhile, was the second-largest source of electricity generation in mainland Spain in 2019, accounting for 20.8% of total energy consumed. That year, Spain ranked fifth worldwide for installed wind capacity. The Spanish wind sector also employed around 24,000 people. These figures suggest that the renewable energy sector could play a key role in Spain’s economy.
Economists at the University of Oxford have ranked each country’s capacity for green production. According to this ranking, Spain is one of the countries with the greatest potential to benefit from a green economy. This is due to its ability to produce and further develop products linked to renewable energy and water treatment and conservation technologies.
European renewable energy legislation
The Paris Agreement was adopted by EU member countries on 12 December 2015 and entered into force on 4 November 2016. It is a legally binding international treaty on climate change under which participating countries agreed to reduce greenhouse gas emissions as rapidly and extensively as possible in order to curb global warming.
It marked a milestone in the multilateral climate process because, for the first time, a binding agreement brought all countries together behind a common cause: making concerted efforts to combat climate change and adapt to its effects.
Its aim is to limit global warming to well below 2°C, and preferably to 1.5°C, compared with pre-industrial levels.
In 2018, the European Union adopted Directive (EU) 2018/2001 on the promotion of the use of energy from renewable sources. It established that the guidelines set out in the Directive were to be applied by the Member States the following year. This represented a major step forward in the energy transition and a firm commitment to clean energy in Europe and Spain.
Spain has traditionally been highly dependent on fossil fuels for its energy, reaching a record high of 81.3% in 2008. Although this figure declined over the following years, energy dependence remained very high in 2018 at 73.4%, almost twenty percentage points above the European average.
However, 2018 saw new legislation introduced in Europe and a positive shift towards renewable energy. According to the 2018 Spanish Environmental Profile (Perfil Ambiental de España, PAE), energy from renewable sources increased by 18.6% compared with 2017, based on data from Red Eléctrica de España. As a result, renewable sources accounted for 38.4% of electricity generation.
The PAE is an annual study designed to share environmental information. Each indicator is described in relation to progress towards the Sustainable Development Goals established in the United Nations 2030 Agenda.
To encourage continued growth in renewable energy production and help meet the requirements of Directive (EU) 2018/2001, the Council of Ministers, acting on a proposal from the Ministry for the Ecological Transition, approved a Royal Decree-Law containing urgent measures designed to support a socially just energy transition.
The legislation introduces measures to improve the use of available resources. It also updates the financial rate of return for electricity generation, reducing it to 5.58% for the period from 2020 to 2025, compared with 6.503% over the previous five years. This average translates into lower electricity costs for both consumers and the General State Budget.
EU renewable energy targets
Under the aforementioned European Union agreement on Directive (EU) 2018/2001, the legislation establishes a number of key targets to be met by 2030:
Reduce greenhouse gas emissions by 40%, including a reduction obligation of 43% compared with 2005 for sectors covered by the EU Emissions Trading System (EU ETS), and 30% for sectors not covered by it.
Increase the share of renewable energy by 32%, with a clause providing for the target to be reviewed in 2023.
Improve energy efficiency by 32.5%; as in the previous case, the Directive provides for a review in 2023.
It is worth noting that, in 2021, renewable energy generated up to 46.6% of Spain’s electricity – considerably more than nuclear power and natural gas combined.
To help achieve the targets established in the Directive and fulfil the commitments made under the Paris Agreement, the EU has adopted a series of monitoring and reporting rules for Member States. These are intended to improve government transparency in the implementation of the Directive by strengthening legislation and including public consultation.
In this context, what can we expect from 2022 onwards?
These targets were expected to drive the expansion of renewable energy in 2022, with an increase of 43% set for the year. Global energy consumption was expected to rise by 2.2% in 2022 as economies recovered from the pandemic.
However, a return to normal energy market conditions by spring 2022 was becoming increasingly unlikely. According to futures data from Iberian market operator OMIP, 2022 was expected to be the year with the highest electricity prices on record.
In view of these forecasts, the Government was already working on an extension of the tax reductions approved in the preceding months to ease household electricity bills.
Against this backdrop, renewable energy was expected to play an increasingly prominent role in the global economy. Solar photovoltaic (PV) installations worldwide could grow by more than 20% in 2022.
This trend could also be strengthened by the reduced VAT rate for solar panels proposed by the European Union, intended to reduce the tax burden on products that support the green and digital transformation of Europe.
If Spain were to apply the reduced VAT rate to solar panels, it would provide an additional measure to promote residential self-consumption, alongside government grants for panel and battery installations and discounts on property tax (IBI).
All these trends suggested that the energy market would remain turbulent throughout 2022, making investment in solar energy increasingly compelling for both residential and industrial users.
Auctions would remain an essential procurement mechanism for utility-scale solar, with regular tenders in major markets such as Germany, France and Spain. These three countries alone were set to allocate at least 11 GW of new capacity through auctions in 2022.
At the same time, the contribution of subsidy-free projects was expected to continue increasing, supported by growing demand for corporate projects.
Meanwhile, new EU legislation had paved the way for reduced VAT rates on solar panels. Together with tax rebates in several Member States, this was expected to improve the payback periods of residential installations during the year that had just begun.
Dial: a leader in solar PV
DIAL SOLAR RENEWABLES, based in A Coruña, was founded primarily by a young team of professionals from the renewable energy sector. Its commitment to innovation, experience and international markets has enabled DIAL SOLAR to establish itself within ten years as one of the leading partners for solar PV investors.
Its projects span both the public and private sectors in Spain and elsewhere in Europe, as well as the United Arab Emirates.
The quality and excellence of its construction work ensure client satisfaction, while its commitment to sustainability and environmental protection complies with European regulations. This positions the company at the forefront of the renewable energy sector, supporting national economic growth through clean energy and corporate responsibility. Follow us on our YouTube channel.
