Spain has pushed a massive rollout of new renewable power plants in recent years and is bracing for an even bigger surge ahead. The green revolution has already shaken up the country’s electricity production, with last year marking more than half of all energy generation coming from renewables. The generating capacity reached a countrywide installed power record of over 125,000 MW. Capacity is increasing, investment in new green plants is rising, and these plants are expected to replace older technologies in the future, such as nuclear or gas-fired plants. Yet the electricity boom is colliding with a drop in demand for power.
Demand for electricity continued to fall last year, reaching levels seen two decades ago. Overall electricity consumption stood at 244,665 gigawatt hours (GWh), down 2.3% from the previous year and the lowest since 2003, even below the 2020 lockdown period when several months saw the country at a standstill or running at reduced capacity, according to records from Red Eléctrica de España (REE), the operator of the Spanish electricity system.
Real consumption in Spain is somewhat higher because REE’s demand statistics exclude data from self-consumption by hundreds of thousands of homes and businesses that generate electricity locally. Most of the electricity they produce is consumed on site, not fed into the transmission grid. Even when accounting for that entire self-consumption, demand remains weak and on a downward trend.
Including the under 7,300 GWh generated by self-consumption facilities last year, the country’s total demand barely topped 252,000 GWh, equaling the 2020 lockdown figures (which also counted self-consumption from that year) and marking the worst result since 2004. Self-consumption accounted for only 3% of all national consumption, so the growth of residential and commercial solar panels explains only a small portion of the demand decline, according to APPA Renovables.
The rise in electricity use has historically signaled economic growth. Spain’s economy is growing, but electricity demand remains flat at early- century levels, mirroring the trough seen during the worst of the pandemic. The energy crisis, with sharp price spikes, and the EU’s energy-saving strategy to shield against dependence on Russia following the invasion of Ukraine have solidified consumer savings. The downturn also reflects a slower take-off in industry, which is typically a major energy user, compared with other sectors.
Alarming signals are coming from electricity sector players, especially renewables, which warn that doubts about the viability of new plants amid weak demand could threaten future investment. The electricity system is a delicate balance where supply must match demand, and renewables need a buyer to stay profitable. This was highlighted by Juan Diego Díaz, president of the Spanish Wind Energy Association (AEE), at the sector’s latest congress, emphasizing the need for demand to rise in step with supply.
As the deployment of new renewables continues and acceleration is needed to meet the green targets set by the government in the National Integrated Energy and Climate Plan (PNIEC) through 2030, renewables players caution that demand remains very low because industrial and household fuels are not being replaced with electricity as quickly as required for environmental and energy goals.
The energy transition is progressing, but electrification of tertiary and industrial use is slower than expected. José Donoso, director general of UNEF, notes that more decisive moves are necessary to speed up electrification and implement it now. He stresses that policy efforts must translate into concrete, near-term changes for both households and businesses.
There is also a push to electrify more sectors and speed up the integration of storage solutions, such as batteries, to store surplus electricity and improve efficiency. Carmen Becerril, president of OMIE, calls for stronger electrification efforts and a broader plan that reaches a higher level of commitment, combining consumers, storage, and a robust grid.
Stakeholders from the renewables and traditional utilities demand regulatory measures to push building electrification, including incentives for heat pumps, and to remove barriers slowing the spread of electric vehicles in Spain, notably the network expansion for charging infrastructure.
The call from the renewables sector is clear: electrifying demand, especially where fossil fuel use can be replaced directly, is essential for the environment and the economy. In 2022, fossil fuel imports topped 90,000 million euros. Reducing fossil fuel demand while expanding renewables and keeping fossil imports low should prompt a strategic shift toward electrification across the economy.
Complete electrification across all sectors is not feasible. Some industries—refining, chemicals, paper, and metallurgy—rely heavily on high-temperature processes and have an electrification potential near zero to five percent. For these sectors, renewable gases such as biogas and, in the medium term, green hydrogen, are seen as necessary paths toward decarbonization.
The electricity market experienced record prices and extreme volatility during the peak of the energy crisis, driven by the economic impact of Russia’s invasion of Ukraine. Prices surged to unprecedented highs and later fluctuated, sometimes collapsing to zero on some days. Both extremes worry renewables firms, who argue that the market design does not send the right price signals to incentivize deeper electrification. With more renewables, wholesale prices tend to fall because of the marginal pricing system, yet the past expansion has coincided with high prices that reflect gas-dependent generation costs. Renewables and other non-marginal technologies supply most of the demand at zero price when they cover the expected consumption, yet the price can still spike when gas plants set the market.
As UNEF’s Donoso explains, an increased share of renewables generally lowers the overall price under a marginal pricing regime, but during heavy expansion the system has shown high prices, underscoring the need for stronger economic incentives to accelerate electrification. Renewables groups also advocate cutting subsidies and incentives for fossil energy use to hasten the shift to green electricity for environmental and economic reasons.
In summary, the path to a fully electrified economy involves balancing immediate demand growth with long-term investments in storage, grid capacity, and a diversified energy mix. The challenge remains to align consumption with the growing renewable capacity, ensuring that the economics of electrification drive investment while delivering reliable, affordable power for households and businesses.