A White Paper written by Áurea Capital Partners analyzes the integration of the European energy market to conclude that Spain is “facing a leadership opportunity and a unique geopolitical advantage that must be taken advantage of and accelerated.” The creation of a National Energy Transition Fund, like that created by Norway for its oil industry, may help the country attract huge investment for clean energy.

From pv magazine Spain

A White Paper published by Áurea Capital Partners, a Madrid-based investment firm focused on renewable energy, analyzes the integration of the European energy market to conclude that Spain is “facing a leadership opportunity” that it must “take advantage of and promote.”

According to the company, the European energy sector is going to shrink and consolidate in the medium term, with an increasing number of fossil fuel companies merging with big electricity providers.

On the other hand, the incorporation of technologies such as hydrogen, geothermal and tidal energy, that until now were excluded from the market due to their high cost, is expected to advance this year, thanks to technological innovation and the internalization of the cost of CO2 in the economy. “The development of hybridization and new energy storage formulas will be two of the major trends in the sector in the coming years,” the report states.

‘Texas of Europe’

In this context of the ecological transition, Spain is defined as the “Texas of Europe,” due to its enviable position in terms of solar radiation.

Áurea Capital Partners experts predict that the penetration of renewables in the mix would save the European economy €254.3 billion in the period from 2019 to 2050, that is 2.12% of GDP in the Eurozone for 2020. “Each euro invested in Spain in solar energy production provides a 35%-higher profit margin than any other country in the EU,” says the report.

Spain can cover its own demand and a large part of Europe’s renewable energy supply with solar energy and storage in an environmentally sustainable – and socially inclusive – way. “It can aspire, without a doubt, to become the main provider of renewable energy in Europe, displacing imports of gas and oil,” said Áurea Capital.

“Spain, with its solar irradiation, is in the same situation as Norway when it discovered … oil pockets in the 1960s and created the largest sovereign fund in the world,” says the report. Although the intervention of the state in the electricity market is against free-market laws and the European structure of the energy market, there is room for Madrid’s participation in the electricity market by channeling investment towards the sector. To this end, Áurea Capital proposes the creation of a National Energy Transition Fund in Spain to serve as a vehicle for pension investment through the creation of independent power producers (IPPs).

“We believe that the creation of a National Energy Transition Fund could mobilize co-investment from pensions and institutional investors with a low cost of capital, towards the creation of IPPs in the energy sector. This fund could be financed through the savings obtained [from not] importing fossil fuels and [from] the pension budget, by modifying the pension law, following the French or Norwegian model,” says Carlos Bendito, CEO of Áurea Capital.

According to him, a special investment mandate for the ecological transition which, by diversification criteria, would not exceed 10% of the total budget – €30 billion – would cover approximately 3.6% of the €830 billion investment in renewables needed by 2050 in Spain.

Challenge

The approach of seeking a replica of the Norwegian State Fund by substituting renewables for fossil fuel assets, however, poses a challenge. While the Nordic assets were in the sea, in the Spanish case they are located onshore.

Due to this difference, it will be key to simultaneously propose, together with the new model, a territorial organization that favors the distributed nature of renewables, and in particular of solar PV, in the Spanish network with interconnected self-sufficient nodes which should be superimposed on European demands. Given that the powers in territorial planning belong to Spain’s autonomous communities, replicating, as far as possible, the national strategy at the regional level could facilitate the process of territorial integration.

“It is also essential to accelerate the interconnection with France and the rest of Europe in order to be able to sell the renewable energy generated by Spain,” Bendito concluded.