Funds and banks quarantine investments in renewable energy in Spain

Specifically, the focus is on solar energy, which is the technology that raises the most doubts. Financial sources confirm that investment funds and banks have quarantined the development of new renewable projects, particularly photovoltaic ones. Raising money for these assets is now more difficult, as is financing.

Andrés Alfonso, partner in commercial law and mergers and acquisitions and director of energy transition at Ashurst Spain, highlights that “This has been one of the most difficult years for photovoltaics and this was reflected in the operations that took place on the market, which were very few. “This is due to structural problems that other technologies such as wind energy also partly suffer from.” There are several pieces in the wheel for even greater expansion of renewable energy.

This lawyer, who is dedicated precisely to advising large energy funds, focuses on the problems of congestion and network management, as well as the lack of storage projects, both independent and integrated into the power plants themselves. “These are structural problems of the system which affect solar energy more acutely because it has experienced great development with a massive entry of projects in recent years, but this has not been accompanied by a strengthening of investments in the networks. Solar and wind power have recently represented 50% or more of global production. energetic “mix” and this has not been accompanied by a proportionate investment in networks,” explains Alfonso.

As energy sector sources point out, current networks cannot support all the renewable production that exists in Spain and which is expected to exist even more in the future, given the attractiveness of the energy transition. However, achieving production targets could be uncertain if the network and profitability problem facing this sector is not resolved.

One of the elements to take into account, and which represents a paradox in relation to the lack of better networks but insufficient demand, are the so-called discards. This is a specific area too much production that demand in the region cannot absorb. The grid is not capable of transporting energy beyond the area where it is produced, leading to its rejection and loss. Just three years ago, this problem was exceptional; it is now structural. In fact, last summer, and also with the impact of Red Eléctrica’s “enhanced mode”, there were historic peaks of these so-called “reductions” (its technical translation into English).

Concerning specific data, a year ago, the volume of these renewable emissions represented 3% of what green energies produced. During this last year, only two months exceeded 2% of rejections. All this with renewable production always above 50% compared to the total mix. However, in May and June it was already above 3%; while in July, this figure stood at 10%, a real anomaly which is increasingly worrying the sector.

“These releases do not generate income and also the prices in certain time slots are negative. And in the medium term, it does not seem that prices will improve,” recognizes the lawyer from Ashurst Spain.

Income problem

Prices are therefore one of the great battlehorses of the renewable sector. Without profitability, it is not possible to continue investing in new projects of any nature. “If you look at the average catch price of photovoltaic solar energy in Spain in 2023, 2024 and 2025 has significantly decreased compared to the average market price. And this is partly because solar energy is limited in its output during the time slots that it can produce, which is when there is light. Without storage capacity, production is concentrated at times of day when energy is much cheaper, with zero or even negative prices,” explains Andrés Alfonso.

Financial sources emphasize that the profitability managed in renewable projects, particularly photovoltaic projects, scares to a certain extent investors, funds, but also banks, who grant increasingly demanding financing to more defined and less risky projects.

Financingwhether from banks or from outside banks (risk capital), are essential to the deployment of new projects. But currently, financial institutions are much more careful than before precisely because of profitability. The problem of debits and prices is transferred to financing and this sometimes makes it impossible to grant credit. Having to produce and deliver energy far from expected revenues is an obstacle to financing. Financial sector sources acknowledge that everything related to these projects is being examined much more thoroughly, although they do not even say that the credit spigot is turned off.

Increased investment in networks

Faced with this situation, experts are calling for more investment in networks in order to better manage all this future renewable production. “We cannot wait for 5 to 10 year plans to solve a problem we already have”underlines the expert from Ashurst Spain, who adds the need to adopt regulatory measures that make profitability attractive, to encourage investments again.

For the moment, everything is in the hands of the National Markets and Competition Commission (CNMC), which sets the remuneration for investments made by electricity companies. However, and despite claims of improvement in this financial performance, the regulator must manage it with caution since this money comes directly from the bill that consumers pay.

In these perspectives, and if all this is not stopped, the financial sector believes that sooner or later, the restructuring of renewable projects, in photovoltaics, will end up happening. And at the same time, in the energy sector, they point out that we are starting to see a lot of activity in other technologies such as biomethanealthough its development is still nascent, we can expect a “boom” of new operations on biomethane projects in the years to come.