From energy ‘hub’ to caboose: the electrical distribution network endangers Spain’s industrial competitiveness

The transition towards an electrified and sustainable economy in Spain has an obstacle ahead: the insufficiency and obsolescence of its electrical networks. More and more authoritative voices warn that, in the last decade, insufficient investment in infrastructure is generating a bottleneck that prevents maximizing the potential of renewable energies and limits the country’s industrial development. According to data from the Association of Electrical Energy Companies (Aelèc), 40% of industrial projects that require electrical connections have been affected, blocking investments worth 100,000 million euros and depriving the labor market of the creation of 1.5 millions of jobs.

Although Spain has seen a boom in solar and wind generation, much of this energy does not reach consumers due to a lack of adequate infrastructure to transport it. This situation has been aggravated by an exponential increase in requests for network access, which grew by 35% in 2023 alone. This mismatch between supply and demand results “in economic losses, delays decarbonization and makes it difficult to meet the objectives climate change”, as some organizations point out. It is the case of Free Market Forumwhich ensures that “the lack of investment in infrastructure also affects industrial competitiveness, limiting growth and innovation in strategic sectors.” Thus, this entity warns that “with a network incapable of supporting the expansion of renewable energies, the country faces a double challenge: solving capacity problems and modernizing critical infrastructure to keep up with the pace of the energy transition. Without a solution, Spain risks falling behind economies that have already addressed these challenges.”

In our country, the management of the electrical distribution network is in charge of Redeia, a system operator that has public participation. Between 2013 and 2023, this entity invested 5.3 billion euros, 37.6% less than the 8.5 billion that reached the annual maximum of 0.065% of GDP established after the 2008 financial crisis. This limit, imposed during the Mariano government Rajoy sought to contain the costs of the electricity sector. For its part, the Ministry for the Ecological Transition has also taken concrete measures to address this problem. It has prepared a draft that proposes increasing investments in electrical networks up to 52,360 million euros by 2030. This plan involves tripling the current investment limit and matching the infrastructure to the real growth in electrical demand, key to facilitating the energy transition.

However, the Executive faces an important challenge: balancing the increase in investments with the containment of costs that directly affect consumers’ electricity bills. The debate on how to finance these improvements without generating a disproportionate impact on Spanish households is a central issue on the political and economic agenda. Surely the analysis and reduction of all superimposed charges on the electricity bill of Spaniards will be the solution to increase investment in networks without increasing the cost for consumers’ pockets.

Despite these investment plans, bureaucracy continues to be one of the main factors limiting the deployment of projects. A joint report by Redeia and the consulting firm PWC reveals that 32% of planned investments between 2015 and 2020 did not materialize due to administrative delays. Depending on the type of project, the procedures can last up to six years, hindering the execution of essential plans for the country’s electrical development. This problem also threatens to block 39% of the investments planned in the National Integrated Energy and Climate Plan (PNIEC). Without a drastic reduction in bureaucracy, Spain could continue to face delays that compromise its ability to lead in the renewable energy sector and meet its climate and energy goals.

What happens in other countries?

The problem of obsolescence and lack of capacity in electrical networks is not exclusive to Spain. At a global level, electrical systems face challenges to adapt to the energy transition. According to S&P Global Ratings, there is a significant decoupling between investments in renewable energy and the networks necessary to integrate them. It is estimated that 700 billion euros are required internationally to avoid a collapse of the electrical system. Furthermore, the European electrical employers’ association, Euroelectricwarns that more than a third of European networks are already more than 40 years old and, by the end of this decade, that proportion will have reached 50%, which requires urgent investments. In the EU, between €375 billion and €425 billion are needed to modernize distribution networks by 2030. Without these investments, both Europe and other regions could face significant bottlenecks that delay the energy transition and the achievement of climate goals. global.

In this context, China and the United States are leading global efforts to modernize their electrical networks and pace the growth of renewables. China allocated 120 billion euros to its electricity networks between 2022 and 2023, while the United States plans to increase its investments by 60% by 2030. These countries have recognized the strategic importance of networks in the energy transition, ensuring that the energy generated by renewable sources can be integrated and distributed efficiently. These efforts contrast with the aforementioned situation in Spain, which “is still trying to overcome the effects of a decade of underinvestment,” as highlighted by Foro Mercado LibreL. “The lack of adequate networks not only delays industrial growth, but also directly impacts the country’s competitiveness, jeopardizing its position as a benchmark in clean energy,” the same organization states.