Battery storage in Spain: Opportunities and challenges for renewable energy producers due to cannibalisation in the Spanish electricity market

published on 30 April 2024

On March 12th 2024, a spectacle took place on the Spanish day-ahead market (pool) that will be repeated in this form for days, weeks and perhaps even years to come. The pool price fell to exactly € 0/MWh between 10:30 and 16:30, only to rise to € 173/MWh at 21:00. The average price was € 42/MWh. The „duck curve” - in the Spanish „pato” - clearly shows the influence of solar power generation in Spain, while the influence of more expensive generation methods can be seen at peak consumption times (around 9.00 pm), when the sun is no longer shining. Surprisingly, it is often the hydroelectric power plants that determine the marginal cost price. At 21:00 on March 12th, it was a gas-fired power plant that set the marginal cost price of € 173/MWh.

In the spring of 2024, the special constellation in Spain was that it was very windy, the sun was shining at the same time and the water reservoirs in the north-west of Spain were partially 100 % full, so that they could (had to) produce electricity continuously. In addition, private consumption was still low due to the mild winter and air conditioning systems that had not yet been switched on. This constellation led to the low pool prices and the voluntary partial curtailment of nuclear power plants in Spain. At full load, the Spanish nuclear power plants generate around 170 GW/h of energy per day, which was last fed into the grid on February 21th.

Since then, production has sometimes been well below full load, e.g. on February 24th with only 112 GW/h. The owners of the nuclear power plants favour shutting down the plants and bringing forward maintenance work over selling the energy at prices that do not cover the running costs.

On March 20th , the Spanish wholesale price had fallen to € 26.24/MWh, compared to the German wholesale price of € 68.36/MWh and the French wholesale price of € 63.59/MWh. Unfortunately, the Iberian Peninsula is unable to export enough electricity to Europe to take advantage of the price differences due to a lack of transmission lines. Accordingly, operators of Spanish PV systems are now faced with the question of how to operate their systems profitably in the future if the price situation on the Iberian Peninsula does not change.
The first solution is battery storage systems that enable peak shift, i.e. feeding electricity into the grid at times when the wholesale price is higher, usually before and after sunset.

Fortunately, the retrofitting of battery storage systems in Spain is unproblematic from a regulatory perspective. The existing feed-in point can be used for so-called hybridisation, although this means that the maximum feed-in capacity is capped by the existing grid connection. This means that if the grid connection was originally granted for 30 MW, only a maximum of 30 MW can be fed in, even though 30 MW of PV and 10 MW of battery storage are installed after the expansion, for example.

Stand-alone solutions are more complex to plan, whereby the grid bond of € 60,000/MW introduced by RDL 7/2023 was probably an oversight on the part of the legislator and is to be cancelled according to the press release.

Transmission fees (peajes) do not have to be paid for the electricity drawn (purchased) from the grid by battery storage systems if it is later fed back into the grid (sold), RD Real Decreto 148/2021.

The introduction of a capacity market is also being considered in Spain. This possible additional source of income (in addition to participation in inter-day trading, first and second regulation), depending on its design, can be decisive for the decision in favour of storage.

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