In Brussels and Madrid this Thursday, a high-level forum organized by the European Commission focused on expanding electricity networks to support the energy transition. Spanish industry leaders urged the government to raise the investment cap so the country can connect roughly a thousand new solar and wind projects planned in the coming years to the existing grid.
Frame-by-frame, the message was clear: strengthening both distribution and transmission networks requires a substantial boost in funding. Francisco Reynés, the head of Naturgy, told the audience at the VIII Energy Forum hosted by The Economist that investment limits and current rules must be adjusted to allow more rapid and larger-scale spending.
Spain’s transport and distribution networks operate under a regulated model that resembles a natural monopoly. Red Eléctrica de España (REE) oversees transmission, while Iberdrola, Endesa, and Naturgy manage distribution. The annual investment cap is linked to regulated charges paid by electricity customers, a main component of the bill that finances network development.
Today, the cap stands at 0.65% of annual GDP for transmission (excluding interconnections), estimated at about 8.6 billion euros using 2022 GDP figures, and 0.13% of GDP for distribution (again excluding interconnection investments and digitalization-related items), which translates to roughly 1.7 billion euros. For years, industry players have pressed to raise or lift these limits. Even after the pandemic, the Ministry of Ecological Transition temporarily nudged the caps to 0.75% for transmission and 0.14% for distribution, bringing the yearly GDP-share to around 12 billion euros in comparison with the previous year.
With a surge in renewable connections anticipated now, executives are calling for a reform of the model. Endesa’s CEO, José Bogas, described the current regime as something designed for a different era. He noted that overregulation can curb infrastructure investments and that it is time to encourage growth by raising the caps.
Renewable energy, already often cheaper than fossil-based power, depends on robust transport and distribution networks to reach end users. Executives from major groups agreed that a bold, forward-looking plan for networks is essential. Iberdrola Spain’s chief executive, Mario Ruiz-Tagle, stressed that the goal is to accelerate the evolution of the grid so renewables can scale and deliver tangible benefits to consumers. He also referenced critiques of the PNIEC for not incorporating flexible, temporary planning aspects for the transport network.
Not only network owners argue for change. Arancha Martínez, the country manager for X-Elio in Spain, emphasized the need for a dynamic approach to transport planning, with reviews every six months and room for adjustments. The current six-year planning cycle, last approved for 2021-2026, is seen as too slow to respond to rapid shifts in technology and market demand.
Last year, in response to energy security concerns intensified by the price shock and geopolitical tensions, the government’s Greater Energy Security Plan signaled that transportation planning would be updated. The Ministry of Ecological Transition announced a fresh planning cycle for 2024-2029, aimed at enabling short-term, strategic projects and improving overall system viability. The path forward hinges on PNIEC guidance and the pace of reform across regulatory and funding rules.
In the near term, certain immediate actions tied to the Recovery Plan are already in motion. Substations in Vigo and Sagunto are slated to support electric vehicle manufacturing plants, with Stellantis and Volkswagen among the key beneficiaries. Royal Decree No. 20/2022, issued December 27, lays out the framework for this review, noting that some investments may be partly financed with European funds while those portions are not counted against the investment limits.
Across the Iberian Peninsula and beyond, the overarching consensus is clear: to unleash the growth of renewables and reduce reliance on fossil fuels, Spain’s grid must be capable of handling a high volume of new connections. The discussions at the Brussels-Madrid forum underscored a broad push for regulatory modernization, targeted funding increases, and planning processes that keep pace with a rapidly evolving energy landscape. The result could be a more resilient energy system in Europe and, by extension, clearer pathways for North American markets exploring similar grid modernization challenges.