Spain is positioned to be a modern El Dorado for many companies, producing energy twenty to thirty percent cheaper than most of Europe thanks to sunny skies and favorable conditions for deploying renewables. Yet while the pace of progress in these technologies remains brisk, industry interest in locating operations within Spain’s borders remains well below expectations.
The assessment comes from McKinsey & Company, which has launched the Energy Transition and Industrialization Index to be published twice a year. It will track Spain’s march toward a decarbonized economy and the resulting impact on the country’s industrial base. The report notes that the energy side is moving adequately, but industry is lagging behind the expectations set for it.
The retreat of industry’s share in the economy is a central topic of debate across the European Union, following the Draghi report that underscores a structural deficit for the continent, pointing to a 17% decline from 1995 to 2023, according to the index. The challenge is even starker in Spain, where industry has shed about a third of its weight over thirty years.
The consultancy argues that Spain should seize the energy transition as a catalyst for reindustrialization. Doing so could yield a roughly 20% boost to GDP and create more than a million jobs, including around 200,000 skilled positions.
Electric Vehicles
In its inaugural edition, the index, which comprises twenty-five subindices, confirms that Spain is progressing solidly in renewable penetration and emissions reductions. Renewables account for about a fifth of total energy consumption, and emissions in the energy sector have fallen by around thirty-one percent while industrial emissions have dropped by about eleven percent when compared with 1990 levels. Electricity prices are starting to become more favorable, yet the value added by industry continues to shrink and investment in research and development has not yet delivered a major leap.
Additionally, there were 250,000 fewer electric vehicles produced than in the 2014 to 2019 period, bringing the total to roughly 2.45 million cars. While overall employment has risen, the share of jobs in industry has declined by about half a percentage point versus the 2014–2019 window.
Although the main gap appears industrial, others within the energy realm also demand improvement and could explain the still limited industrial appetite. One critical issue is energy dependence, which remains high at about seventy percent, versus the European Union average of sixty-three percent and well short of the fifty percent target set for 2030.
Green Hydrogen and Biogas
There is also progress in other clean technologies beyond electricity, including green hydrogen, biofuels, biogas or biomethane, and in the sales of electric vehicles. Analysts note that vehicle registrations of these models hover around twelve percent, in contrast to roughly fifty percent in some European peers.
“Energy is a decisive driver of industrial competitiveness that could help decarbonize existing industries and spur the establishment of new battery plants, circular chemical production, or steel facilities,” says Maria Joao Ribeirinho, a senior partner at McKinsey & Company.