Global Power Transmission Report

The Spanish power transmission network, operated by Red Eléctrica de España (REE), is predominantly at 220kV and above voltage levels. Over recent years, the network has stood out in the European Union for its progress in achieving a decarbonised power system. Seamless grid integration is among the key challenges for the TSO, not least because of the increased prevalence of renewable power. The country’s geography requires that it have ten different electrical systems. The non-peninsular areas have separate operations because of their size and isolation. (REE, 2024).

The peninsular system is connected to France, Portugal, Andorra and Morocco, accounting for over 90% of the total power demand. The peninsular segment is notable for its cross-border interconnections, which enable cross-border power trade. The Iberian power market, involving integrated Portuguese and Spanish power systems, plays an important role in this regard. The interconnection is gradually being augmented even further for enhanced transactions. Due to the critical role of these projects, several of Red Eléctrica’s interconnection projects are also classified as ‘projects of interest’ in the EU, which helps attract funding and related support.

The onshore transmission infrastructure is expanding to accommodate demand arising from new connection requests, reinforcement of links between the islands, and improving the network’s meshing and reliability. By the end of 2023, the operator added 157 km of new lines and 143 new substations (REE, 2024). The capacity growth needs to be much higher to match the rising demand on the grid. Between 2019 and 2023, the total transmission line length registered a CAGR of 0.4%, while the year- on-year growth in 2023 was just about 0.2%. The line length grew by an annual average of 2.1% between 2010 and 2016. There has been a deceleration in the incremental capacities since then (Statista, 2024).

An expanding renewable energy base increasingly displaces a significant share of conventional energy resources. Coal is the most discernible one in this regard. Its already insignificant share will decline further as the government actively seeks to allocate replacement capacities instead of coal plant retirements. (Energy Storage News, 2024). The entire process could be completed by 2025 as the speed of the process has been far higher than anticipated earlier. Active policy assistance regarding financial support for the plant operators, labour and other key stakeholders has helped. A much less steep decline is observed in the case of gas-based power, whose relative share stood at 22% in 2023 against 26% in 2020. The advantages of gas-based power units, such as enabling grid flexibility, have helped retain their share in the power system, although they have a diminishing role. According to the country’s gas grid operator Enagas, the gas-fired power plants are likely to be in operation beyond 2030 (Montel News, 2024).

The displacement of conventional energy sources extends to nuclear power, where a marked decline is underway. A significant share of nuclear generation is already going offline in the run to a targeted phaseout by 2035 (Reuters, 2023). In March 2024, the nuclear power generation in the grid was reduced to half, partly due to the recurring maintenance issues and in significant part due to the surge in renewable power. The power plant operators held high wind power output as the major reason for placing the units on standby (S&P Global, 2024). Officially, the decommissioning of nuclear power plants is expected to start in 2027, expecting renewable energy and energy storage capacities to compensate for the gap (Balkan Green Energy News, 2023).

The transmission operator is thus likely to face significant pressure from the displacement of conventional energy in the upcoming 5-6 years. Grid flexibility options such as in gas or long-duration battery storage may play an enhanced role. Notably, the large-scale phaseout of conventional energy does not impact the outlook for electricity demand. BNEF projections show that the country’s total electricity demand, modelled in a macroeconomic framework, could register a compound annual growth rate of 0.7% between 2024 and 2035. Instead, the sub- transmission (or the medium-to-low voltage distribution network) could be in focus because the same BNEF projections point to a 23% rise in demand arising from electric vehicles.

The ongoing network investment under implementation refers to the approved plan period of 2021-2026. Fully implementing this plan would entail 2,681 km of new transmission lines and 7,057 km of uprated lines with related expansion in other transmission assets (Redeia, 2022). The trend so far points to much lower annual incremental capacity. In the five years to 2023, an average of 192 km of line length was added annually. Thus, the progress in this plan will be a vital input for investors and developers, and the subsequent transmission planning period of 2025-2030, for which studies are underway.

Better incentives are needed to address the issues of timely capacity augmentation. The cap on the grid operator’s investment commitment stands out as an oddity compared to expectations of large-scale infrastructure expansion. The planned revision of this cap is overdue, and delays are unlikely to help the operator’s case. Otherwise, the investment commitments are likely to lag the required levels. For instance, BNEF’s Net Zero Scenario projections suggest that Spain’s annual average investments in the grid network (transmission and distribution) should be $6.4 billion from 2024-2030. In practice, the annual planned investment till 2026 is at $4.7 billion.

Spain’s success in energy transition goals is likely to be tested by the timeliness of the grid network availability. The planned capacity addition will also entail a marked shift from the legacy processes followed by the regulator, policymakers and network operator over the years.