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    The other Iberian exception: sun and wind put the Peninsula on the global energy map

    May 19, 2023 - CE Noticias Financieras


      With the energy crisis still lurking and wild prices on the horizon, it is still hard to imagine anything different from what has happened in recent times, when electricity has been little more than a luxury good. However, the change brought about by the massive entry of renewables into the system is becoming more tangible every day. Cheap electricity - at knock-down prices, even on weekends and holidays - is becoming the new norm in the middle of the day, when solar panels and wind turbines join forces. This week, Spain has gone a step further in its race towards a 100% renewable model: on Tuesday, between ten in the morning and seven in the evening, the green trilogy (sun, wind, water) generated more energy than was needed to cover national demand. A milestone within the reach of very few large countries (almost 50 million inhabitants), with the permission of Australia. The future is already here, and the Peninsula is in a privileged situation to face it.

      More informationThe nine hours in which Spain made the 100% renewable dream a reality

      The Iberian exception was the name that finally prevailed in the public debate to refer to the oft-cited gas cap, the mechanism with which, in the worst days of the crisis, Spain and Portugal managed to avoid an even greater scandal in the electricity market and separate their price path from that of the rest of Europe. However, both countries are on the way to consolidating a second exception, this time structural: the renewable boom, spurred on by the everlasting lack of interconnections, will cause a total decoupling of prices between the Peninsula and the rest of the continent. "The price difference with the rest of Europe began with this mechanism, but it is green energies that will make it permanent," says Natalia Collado, a researcher at EsadeEcPol, "We are already a global renewable energy hub and we are going to become more and more so, with many hours of sunshine, which will give us a structural advantage over the rest.

      After missing the train of the first and second industrial revolutions, Madrid and Lisbon - two net importers of energy, weighed down by the very heavy fossil fuel burden - are now facing a golden opportunity to jump on this other process of accelerated change, in this case energy. With one of the highest irradiation rates in the Old Continent and plenty of available land, Spain has the necessary conditions for photovoltaics to flourish. Portugal, on the other hand, has a head start in wind power - also offshore - and hydroelectric power, a characteristic that increases the complementarity between the two. "You are blessed with the sun and the wind," said Larry Fink, the most powerful man in the world stock market, in an interview with EL PAÍS this spring.

      More informationThe unprecedented explosion of renewables: more than 1,400 projects on the way.

      "Although many people do not want to see it, we are rich: in terms of solar resources, practically no one comes close to the levels of Spain and Portugal. And in wind we are also privileged, although we are not exploiting it as much as we could," says Francisco Valverde, a consultant at Menta Energía and one of the most authoritative voices on renewables. "We should be putting up panels and wind turbines as if there were no tomorrow, both for environmental and economic reasons. There is no renewable bubble: there is a historic opportunity that must be seized." Alejandro Labanda, director of Ecological Transition at the consultancy BeBartlet, agrees: "A new region of green energy development and low prices is being created, as the Nordic countries have been until now thanks to hydroelectric and, to a lesser extent, wind power. Now it is the Peninsula that can be located there".

      Pending the new roadmap for renewable deployment - which will be published in a matter of weeks and which will raise the targets even higher - the current version of the Spanish National Energy and Climate Plan (PNIEC) sets the goal of moving from the current 21 gigawatts (GW) of photovoltaic capacity to just over 39 by the end of the decade. In the case of wind power, the goal is to increase from 30 GW today to 50 GW in 2030. These figures, based on the latest batch of environmental impact statement approvals, after which there are already 1,400 projects underway in Spain, seem more than plausible. Especially in the case of solar energy, where the appetite is particularly strong.

      Attracting industry, the key

      What can be done with this competitive advantage? There are basically two ways: sell the energy in the form of electricity - which would require a major investment in interconnections across the Pyrenees - or green hydrogen; or take advantage of these lower prices to attract industry.

      "These are not mutually exclusive paths. For the first time we are going to have a surplus of emission-free, domestically generated energy: this is something that has no historical precedent," Collado points out. Labanda, however, believes that the focus should be on attracting manufacturing companies: "This is what will enable us to create jobs and retain the added value provided by industry. The two Iberian countries are facing another great opportunity, perhaps the only one, to industrialize, not to depend so much on tourism and to get out of Europe's tail wagon in many economic indicators".

      More informationDrought dents electricity generation, but does not affect prices

      Low electricity prices - which will continue to fall as all these budding projects crystallize - should allow the private sector to both substantially reduce its energy bill and certify the products it puts on the market as green, a booming value. "The price of energy is increasingly weighing on companies' relocation decisions, and if Spain and Portugal manage to position themselves and promote their advantages well, they will undoubtedly be able to attract industry. Especially at a time like this, when all fossil fuel industries need to electrify," says Carlos Torres Díaz, head of electricity and gas analysis at the Norwegian consultancy Rystad, which projects "a migration" of electro-intensive companies "in the medium term" in search of lower costs.

      Pedro Linares, from the Universidad Pontificia Comillas, is somewhat more cautious. He asks us not to take all the bells and whistles off: "On paper, all the electro-intensive industries will have a great incentive to come to the Peninsula, but we have to look at many other elements of market analysis that are also very important and increasingly more so, such as proximity to the end consumer".

      Electrification, the great challenge

      From a purely internal point of view, this historic opportunity is in danger of coming to nothing if two key keys are not touched: electrification - converting into electricity those activities that still use fossil energy - and storage - developing a dense network of batteries and hydroelectric pumping to avoid wasting green electricity. However, according to Labanda, the urgency lies in the former: "Storage is important, but what is really urgent now is to get the electric car off the ground and heat pumps to replace gas boilers. Electrification has to be the number one priority of the government that emerges from the polls at the end of the year". This also applies to Portugal, although there the electric car is advancing at a much slower pace, comparable to that of the leading countries in the EU.

      The data support the urgency to electrify. Oil, gas and coal still account for almost 70% of the primary energy consumed in Spain, a figure that is falling very slowly. This figure not only implies brutal damage to the environment, in the form of greenhouse gas emissions, but also damages the trade balance (all fossil energy is imported, unlike renewable electricity) and undermines Spain's own strategic and economic sovereignty, as it is exposed to the uncontrollable vagaries of OPEC and large gas producers, such as Qatar.

      Portugal: fewer panels, more wind turbines

      Despite lagging behind Spain in the implementation of photovoltaics, Portugal, which will no longer have coal-fired plants in operation as of 2021, is among the four most advanced countries in Europe in the production of electricity from renewable sources. In the first quarter of the year, these sources generated 72% of electricity, thanks mainly to hydroelectric and wind power, although their share drops considerably during the warmer months. The current drought means that renewable electricity production is expected to fall in the coming months, as it did in April, when it fell to 49%.

      António Cardoso Marques, professor of economics at the University of Beira Interior, argues that Portugal has great potential for solar energy production that is currently untapped and will be needed to reach the target of 80% electricity from renewable sources by 2026. "Considering that onshore wind potential can no longer grow much more, the bet is on offshore wind, with the auction forecast for this year, and the enhancement of photovoltaics," he says. Solar now contributes only 6% of electricity production, far behind hydro (45%) and wind (35%).

      It is an imbalance that the government is hastily trying to redress. In recent months, several photovoltaic plants have been inaugurated and work has begun on large complexes, such as the Santiago de Cacém complex, near the port of Sines (south), which, with 1.2 GW of power and almost two million panels, will become the largest photovoltaic plant in Europe by 2025. The Ministry of the Environment and Climate Action plans to grant licenses for another 2.5 new gigawatts of solar power this year. The other mainstay to be strengthened this fiscal year will be offshore wind, with the goal of reaching 10 GW by 2030.

      In an effort to accelerate renewable production, António Costa's government has simplified the administrative procedures for smaller projects, which now do not have to undergo mandatory environmental assessments. All the projects related to the energy sector that are planned in the coming years in Portugal amount to around 60 billion euros (a quarter of the GDP), according to the Minister for the Environment and Climate Action, Duarte Cordeiro.

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