Since the cancellation of the ‘Sun tax’ on self-consumption in 2018 and the finalization of the current framework in 2020, rooftop solar capacity increased from 596MW in 2020 to 2.5GW in 2022. The growth was further motivated by high electricity prices, energy uncertainty caused after the invasion of Ukraine, as well as the promotion of the aid contemplated within the Government Recovery Funds. Additionally, eliminating building permits in autonomous communities and simplifying administrative barriers to self-consumption are creating a positive synergy to make self-consumption more common and accessible. According to Spain’s Roadmap of Self-Consumption, approved in December 2021, its self-consumption segment could install between 9GW and 14GW by 2030.
Furthermore, the Spanish Government simplified approval procedures through Royal Decree-Law 6/2022. The decree set provisions to conduct self-supply capacity auctions in nodes and provided regulations for floating solar PV plants, thereby unlocking new avenues for PV development. In 2022, the Spanish energy ministry approved changes to environmental planning rules which will fast-track permitting of solar projects with capacities up to 150MW. The streamlined process will remain in place until 2024 and will only apply to projects with a low or medium environmental impact.
A major part of the government’s plan to develop renewable energy in the country is through renewable energy auctions, one of the primary tools under the Renewable Energy Economic Regime (REER). Following several successful auctions, the fourth renewable auction in November 2022 was largely undersubscribed. The main reason for its failure was banked upon the fact that it failed to consider the increased costs of new renewable energy projects. However, to renew investor and developer interest, the Spanish government expects to hold the next renewable energy auction in October 2023.
Failure of the latest auction is somewhat offset by the growing corporate PPA market. In 2022, developers signed 8.4GW of PPAs in Europe, where Spain held the largest share with around 3.2GW of disclosed capacity across 31 deals. PPA markets in Spain are driven mainly by post-pandemic manufacturing booms and reduced logistical challenges. Additionally, the gradual decline in inflation, although compensated for by higher interest rates, has given developers greater transparency into their capital expenditures, thereby reducing uncertainty in their PPA calculations. Price drops are expected in Q2 due to an influx of solar supply, putting downward pressure on PPAs. According to the Ministry of Ecological Transition, 132 solar PV projects were approved in January 2023, further confirming the hypothesis that prices will decline. Additionally, the drop in natural gas and wholesale electricity prices is forcing developers to decrease their PPA prices to remain a competitive option for buyers.
