Electrical grids serve as the backbone that makes the energy transition possible. Their modernization and expansion are essential to integrate large-scale renewable deployment and to connect major energy-intensive projects, from data centers to new factories capable of electrification, and the forthcoming green hydrogen plants.
The National Integrated Plan for Energy and Climate (PNIEC), approved by the Government with green targets through 2030, envisions electricity demand rising by about 45 percent from current levels to support the surge of renewables, with a goal that 81 percent of electricity production is clean by the decade’s end. Achieving these targets requires accelerated electrification across more sectors and a reliable grid to prevent congestion in production and consumption.
Large groups such as Endesa, Iberdrola, Naturgy and EDP, which own most of the distribution networks in the market, press the Government and the National Markets and Competition Commission (CNMC) for regulatory reform to speed up investments, remove growth limits tied to GDP, and increase the returns paid through the electricity bill. The forthcoming regulatory framework for networks is under study and is expected to take effect in 2026.
Industry players and the association Aelec, which groups Iberdrola, Endesa and EDP, have warned that without stronger networks the energy transition cannot advance. They point to years of lost industrial projects due to insufficient connection capacity and the high cost of new lines. In many cases, distributors have rejected about one in three connection requests because capacity is insufficient or because the cost of new lines makes the project unfeasible for the client.
Over the past four years, distributors operating in the market have received requests to tap into their networks totaling 55,098 MW for industrial users. They have had to reject connections for projects amounting to 18,240 MW since 2020, roughly a third of the total, according to sector data and the information reviewed by EL PERIÓDICO DE ESPAÑA.
Between 2022 and 2023, the market saw 45,906 MW of access requests, and one in three projects was rejected, totaling 15,675 MW of denied capacity. The surge in requests and denials has been a focal point for concerns about the efficiency of the grid and the pace of the energy transition.
From the sector’s viewpoint, hundreds of industrial projects risk being stranded, especially data centers, energy storage facilities, new industries, plant expansions and charging networks for electric vehicles. It is noted that not every request comes with a firm development plan; a single project may seek connections at multiple points in the grid, which can cause the same power demand to appear several times in the statistics. In late last year the Government introduced new rules to guard grids against speculative phantom Permits, with permissions withdrawn if progress on installation is not demonstrated.
Investment caps and the regulatory framework
The business of distribution and transmission is regulated, with investments constrained by legal ceilings and returns paid through tolls on every electricity bill. The CNMC is updating how the returns for distribution are calculated, while the Government reviews the maximum investment cap. Currently, Red Eléctrica’s cap stands at about 0.065 percent of GDP (excluding international interconnections) and the cap for the distributors is about 0.13 percent of GDP. In total, roughly 1,000 million euros per year for transport and just under 2,000 million for distribution are protected by these caps.
The major electric companies have pressed for higher investment caps and greater returns to speed up the grid’s modernization, and they want the rate of return to be updated beyond a current 5.6 percent to around 7 percent, in line with some European peers. The Aelec association has argued for a new regulatory formula that would allow investments to be brought forward, wiring lines ahead of a client’s readiness.
The CNMC’s latest economic-financial analysis of the distribution business shows that, over the last five years, the five biggest players invested an average of 1.517 billion euros per year, below the cap in every year of that period. The peak investment occurred in 2022 at 1.722 billion euros, while the distribution cap stood at 1.837 billion euros that year. The regulator’s conclusion is that current caps were not fully utilized.
The Government’s objective for 2026–2030 is to boost investment in distribution and transmission to support electrification, while also containing the cost that would be added to the electricity bill. Among the options under consideration are raising the cap as a share of GDP, revising the investment assumptions to reflect the transition, and creating a fast-track process to authorize investments above the cap when requested by Red Eléctrica and the major utilities.
There is a broader intention not to load new grid costs onto consumers. Part of the strategy relies on European funds to finance a portion of the expansion, reducing the impact on peajes (tolls) borne by all users. The Recovery, Transformation and Resilience Plan (PRTR) addendum allocates 931 million euros to REE to cover the expansion program; this funding is expected to enable more than 1.8 billion euros in investments overall.
Some of these funds will support the urgent expansion of high-voltage networks and the rest will feed into the new Planning Electrical 2025–2030, a fully refreshed plan that will replace the current schedule ahead of 2026. The government’s aim is to align grid development with the scale and pace of the energy transition while protecting consumers from abrupt price increases.