[et_pb_section admin_label=“section”] [et_pb_row admin_label=“row”] [et_pb_column type=“4_4”][et_pb_text admin_label=“Text”]
Spain and Portugal could export vast amounts of renewable energy to the rest of Europe but only if there is the political will to invest heavily in sufficient infrastructure
PLENTY TO SPARE
The Iberian Peninsula is currently a net energy importer today but a massive buildout of renewables promises to change the picture ROUTES TO MARKET
As low-cost renewable capacity builds up, the challenge for Spain and Portugal will be to find ways of moving the energy abroad KEY QUOTE
You would think it would be a no-brainer to say, “Let’s do everything possible to develop the clean energy resources of southern Europe”
The importance of Europe’s energy supplies was dramatically underlined at the start of 2022 as Russian armed forces massed at the border of Ukraine. Germany dithered while NATO nations rushed to agree on measures that might stop a Russian push into Ukrainian soil. Germany gets roughly half of its natural gas from Russia meaning its citizens would be hard hit should Russian premier Vladimir Putin cut the supply. Coming after many months of soaring gas prices across Europe, the prospect of gas shortages became a test of Germany’s loyalty to its NATO allies. For energy market observers, the crises highlight the value of weaning Europe’s energy systems off gas—imported or domestic—and switching to renewable energies instead. Germany would not have to look far for alternative energy supplies, either. Less than 1000 kilometres southeast of Stuttgart lies a region blessed with abundant wind and solar resources—and some of the lowest renewable energy prices in the world. CHEAP RENEWABLES Spain beats France, Germany, Italy, the Netherlands, Turkey and the UK on the levelised cost of energy for newly commissioned utility-scale solar projects, according to the International Renewable Energy Agency. Meanwhile, neighbouring Portugal has set world records for solar pricing two years in a row. The second time, in August 2020, the lowest winning bid in a government auction was just €11.14 per megawatt-hour. Both countries are also strong onshore wind markets. Portugal’s wind generation capacity made up almost 28% of electricity production in 2021. In Spain, the figure was over 23%. Spaniards got more electricity from wind power projects than any other generation source during the year. Despite this, the Iberian Peninsula is a net energy importer, mostly because Portugal’s energy requirements currently exceed its production. In 2021, Spain imported a net 5.6 terawatt-hours (TWh) of electricity from its largest energy partner, France, according to data from grid operator Red Eléctrica de España (REE). The same year, Spain delivered net exports of almost 4.7 TWh of electricity to Portugal. Spain, therefore, is already exporting almost as much energy as it consumes. GROWING CAPACITY Export capacity on the transmission network is set to grow as Spain and Portugal embark on massive renewable energy buildout plans. Portugal is aiming for a four-fold increase in solar energy capacity, to 9 gigawatts (GW), by 2030, according to AleaSoft, a Spanish energy forecasting company. Over the same period, Portugal is also expected to install 67% more wind capacity than the 5.6 GW it had in 2021, and 19% more hydro, up from 7.1 GW. Meanwhile, by the end of the decade Spain is planning to add 149% more photovoltaic solar capacity to the almost 15 GW installed as of February 2022, plus 69% more wind capacity to the existing 28 GW and 17% more to its 17 GW fleet of hydro. This should allow Spain to obtain 42% of its total energy mix from renewables by 2030, based on the country’s National Integrated Energy and Climate Plan (NIECP). Alongside these more traditional renewable energy sources, Spain and Portugal have ambitions to become European offshore wind leaders. OFFSHORE WIND Neither country has been able to profit from offshore wind because their waters are unsuitable for sea bottom-fixed wind turbines. Around the Iberian Peninsula, the seabed falls away sharply off the coast and waters quickly become too deep for wind turbine foundations. Instead, the markets are supporting the development of floating offshore wind technology to overcome the deep waters. Portugal has taken a lead after installing three 8.4 megawatt turbines at one of the largest floating wind projects to date. Spain is following close behind. In December 2021, the Spanish Ministry for Ecological Transition signed off a marine energy roadmap that foresees developing up to 3 GW of floating wind by 2030. “Spain has the opportunity of becoming a technology development and industrial hub for offshore wind, especially floating technology,” said Spanish wind body Asociación Empresarial Eólica (AEE) in September 2021. EXPORT POTENTIAL In a perfect scenario, Spain’s offshore wind projects alone could equate to 40% of all the offshore floating wind capacity in the European Union by the end of the decade. Spain and Portugal’s renewable energy buildout plans mean the Iberian Peninsula is well placed to export cheap renewable energy to the rest of Europe in the next ten years. Still, due to the variable nature of wind and solar energy, both countries will need to have significantly more capacity than they need to completely remove carbon-emitting generators from their energy systems. This means that during times of high solar and wind resource they will have more energy than they can use. It makes sense to export this energy to the rest of Europe if possible. Spain’s NIECP predicts the country should be able to deliver net exports of 13.8 TWh a year by 2025 and 39.3 TWh by 2030, of which 27 TWh could be destined for France to help cut Europe’s power sector emissions. AleaSoft data shows how increasing levels of wind and solar power have already replaced coal and gas on the Spanish grid and cut emissions from around 100 million tonnes of carbon dioxide equivalent in 2007 to about 30 million tonnes in 2020. The problem is how to get this energy across the Pyrenees mountain range on the border with France and the rest of Europe. Spain has seven electricity interconnectors with France, totalling around 2.7 GW of capacity, plus a 110-kilovolt link to Andorra. LIMITED INTERCONNECTION Spain’s interconnection ratio—the amount of electricity it can export as a percentage of total generation capacity—is less than 6%. This is despite a 2002 European Union recommendation that all member states should have an interconnection ratio of at least 10% by 2020. Portugal has it even worse, with no direct grid connections to the rest of Europe except Spain.Lawmakers are aware of this deficiency and with European Union guidance now specifying all member states need an interconnection ratio of at least 15% by 2030 there are moves to improve transmission capacity between Spain and France. Work is underway to add 6 GW of cross-border capacity across three 2 GW interconnectors. POTENTIAL SETBACKS These links are planned to go live between 2026 and 2030, and there are also plans to build a subsea interconnector from the Basque Country in northern Spain to Southwest England—via Cordemais in western France. Like any large infrastructure project, though, these interconnectors are subject to setbacks: engineers have detected problems with the seabed at one site, while another interconnection plan is facing local opposition. FRENCH APPETITE Complicating the picture is the fact that France has no pressing need to buy clean energy from the Iberian Peninsula. Due to its massive nuclear fleet, which covered 67% of the nation’s demand in 2021, France was the biggest net exporter of power in Europe during the second half of 2021, according to EnAppSys, an energy data analyst firm. The country also has one of the lowest-carbon electricity systems in Europe. Thanks to nuclear and renewable energy sources such as wind and solar, France sourced more than 90% of its electricity from low-carbon sources last year. Consequently, clean energy imported from Iberia would likely just get shipped to the rest of Europe, without benefiting France. Or worse—from a French perspective—it could displace electricity generated by France’s nuclear fleet, putting the country’s most prized generation asset in danger. The government and operators will want to maximise the use of France’s nuclear fleet before the planned reduction of capacity in the 2030s. “You can see a correlation between the hourly production of more than 10 GW of wind generation in the Spanish market and a balance of exports to the French,” says Heikki Willstedt of the AEE. “In other words, when there is a lot of wind resource in Spain the tendency is to export to France because the electricity is cheaper here—especially in winter, when electricity consumption is very high in our neighbouring country,” Willstedt adds. HISTORICAL FRICTION France’s lack of interest in energy imports from Spain has been blamed for the historical lack of interconnection links between the two countries. In 2014, Spain and Portugal threatened to block the European Union’s climate package for 2030 if France did not agree to greater levels of interconnection. The spat was seen as a test case for Europe’s energy union plans and helped trigger the latest round of interconnector projects. It remains unclear what would happen to the projects if a protectionist government came to power in France, though. If the links are halted or delayed, the renewables industry is looking for another way Europe could benefit from the Iberian Peninsula’s bountiful clean energy resources. GREEN HYDROGEN Hydrogen today is mostly used for ammonia production and petroleum refining but its production releases large amounts of carbon dioxide. However, so-called green hydrogen can be made by using renewable energy to power the electrolysis of water. This gas can not only be used for ammonia production but also as a feedstock, a power source or a fuel precursor for many industries, such as steelmaking and shipping, which currently rely on fossil fuels. Spain is leading the charge for green hydrogen production in Europe. In July 2021, the country had announced more than 2.2 GW of electrolyser capacity was due online by 2024, accounting for over a third of the European Union’s entire green hydrogen production target by that date. The Spanish government is backing the sector with a €6.9 billion, two-year Covid-19 recovery spending package announced in December 2021. HYDROGEN FLOOR The package, which also aims to support the growth of renewables and energy storage, aims to attract almost €9.5 billion in private funding. Meanwhile, Spanish multinational electric utility Iberdrola is racing to become one of the world’s top green hydrogen producers. It is building Europe’s largest green hydrogen plant, in the province of Ciudad Real, central Spain, and has announced a €2.3 billion venture with low-carbon steel developer H2 Green Steel. Antonio Delgado Rigal from AleaSoft says green hydrogen production could be important in sustaining Spain’s clean energy development momentum. As it stands, if too much clean electricity gets produced by wind and solar plants then there is a danger electricity prices could drop below a level that makes it worthwhile to build new projects. However, in the future, if prices drop in an economy backed by green hydrogen then renewables projects could simply supply electricity for green hydrogen production instead. “This means that a virtual floor will appear in electricity markets,” Delgado says. “Prices will not drop further because at that point electricity generators will decide to produce green hydrogen, which will give them higher returns,” Delgado says. TRANSPORT CHALLENGES While this is a good prospect for Iberian energy markets, when it comes to exports, green hydrogen has its own challenges. The lightest element in the universe, hydrogen is volatile and must be either pressurised or liquified before it can be moved from one place to another. Shipping the gas using vessels “looks really, really expensive,” says Richard Lowes of the Regulatory Assistance Project, an energy transition non-governmental organisation. “So that will require new pipelines, which are expensive and take a long time to build,” Lowes adds. Indeed, if electricity interconnectors already face local opposition and technical challenges then it is hard to see how hydrogen pipelines, which will carry a gas that leaks easily and is highly explosive when mixed with air, could be built any faster. As a result, getting energy in any form out of the Iberian Peninsula to markets such as Germany will not be easy—and could require a level of European coordination that has not been seen before. Coordination was a stumbling block for a previous attempt to ship clean energy from the Mediterranean region to countries such as Germany in the north. In the early 2000s, German energy experts led an initiative called Desertec that aimed to produce renewable energy in the Sahara and export it to Europe. As a potential source of clean energy exports, North Africa is many times larger than the Iberian Peninsula—but getting agreement on where and how to send energy to European markets proved too great a barrier for the scheme to prosper. Recent disagreements between European members over whether natural gas and nuclear power should be considered green energy sources would seem to indicate that things have not changed much since Desertec’s days. “You would think it would be a no-brainer to say, ‘Let’s do everything possible to develop the clean energy resources of southern Europe in order to keep Europe together’,” says Jonathan Walters at E3G, a European climate change think tank. However, “The politics tells you countries are divided in Europe,” he says. •
TEXT
Jason Deign
[/et_pb_text][/et_pb_column] [/et_pb_row] [/et_pb_section]