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- [00:00]
A
I'm your host, Ed Porter. Welcome back to Transmission. Spain has nearly 40 gigawatts of grid scale solar. But more generation hasn't meant better returns or a more stable grid. And solar's dominance hasn't automatically been followed by storage. Today, Pablo Martinez, Moto Ng's head of Iberia, joins us to walk through what's really going on in the Spanish market. The economics, the blackout, the regulatory shifts, and where the batteries are finally about to catch up. If you want to dig into the Spanish market, Co Moto Ng's AI analyst is a great place to start. Link in the description now onto the episode. Hello, Pablo, welcome to Transmission.
- [00:46]
B
Happy to be here.
- [00:48]
A
Super to have you on. And let's dive straight in. So what's the one thing that everyone gets wrong about Spain?
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B
So Spain, I think when you look at it from the outside, most of people go like, okay, Spain, lots of sun, therefore lots of solar. And that must mean good business for batteries. And this is not necessarily true. Like we've got a very significant solar fleet we've built over the last six, seven years, really. But the dynamics we're seeing in power markets are very different to what we've seen to the rest of Europe.
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A
Okay, but it is true, right? Lots of sun, lots of solar. There's 35 gigs ish of solar, maybe more.
- [01:27]
B
So in terms of utility scale, it's close to 42 gigawatt of solar. And then when you add the rooftop on top of that, it goes all the way to 50.
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A
So there is a lot of solar. But then the question mark is, okay, well then how does that translate to good power prices for battery storage? So where is it falling over?
- [01:46]
B
Let me reframe it. So what do people usually get wrong about Spain? It's not like we don't have storage. We have lots of storage through pump hydro. And I think that that's the main difference compared to most European countries in which Spain as a country got away without having best battery energy storage for so long because of the reliability on hydro.
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A
Well, let's do that. Let's paint the picture for listeners in terms of how much there is of each generation technology. And then also let's also look at demand as well, because that's the other kind of part of this equation. So we've done solar, 42 gigawatts of grid scale. Let's do gas and hydro.
- [02:28]
B
So gas, it's very significant. Fleet of gas generators, CCTs, it's close to 26 gigawatt hydro assets, we've got runoff river, we've got the bigger assets that can store energy for longer periods of time that in total, let's say close to 18 gigawatts of generation depending on the time of the year. Then on top of that it's 32 gigawatt of wind. And in terms of demand, we're talking about 40 gigawatt of peak demand, which I think it's similar to GB, very similar to GB.
- [03:04]
A
I think we're probably, if you're on the wind, solar balance, we're going to be higher on the wind, less on the solar. Um, but yeah, very, very similar in terms of demand. So there are, there are definitely parallels between the two.
- [03:15]
B
What about nuclear?
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A
Nuclear? So we have a few nuclear plants closing down in gb. Longer term we'll have things like Hinkley Point C, Sizewell C, some small modular reactors. So longer term in GB, potentially like lower end is between 7 to 10 gigs. If we get more of the government's plan in terms of more SMRs, that could be adding another 15 gigs, 20 gigs to that, to that size. So, so we're not actually sure what the definitive long term view looks like in, in gb, but it, but quite a few of those nuclear sites are closing down today and so it's a, it's a bit of a handover process going on. What is it? What does nuclear look like in Spain?
- [03:56]
B
I'd say it's completely the opposite. So we've got seven nuclear reactors at the moment, so 7 gigawatt of generation, but the idea is to close them down, or at least this is the current government's plan. Having said that, nuclear generation, it's key to grid stability. So this kind of baseload Generation that runs 24 hours a day, seven days a week, it's great for grid stability, this kind of base load that you can rely on. And this is especially true for when we've got periods of lower demand. So for example, during spring or during autumn, demand is lower and you will see especially in the spring that nuclear reactors want to do their maintenance there and then the grid becomes a lot less stable because of this.
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A
Well, let's really talk about that because the bit we didn't talk about in demand, right, so when we're doing the Spain to Great Britain comparison, in Great Britain all of our load really comes in winter for heating and because we get long periods of darkness. So traditionally like a really winter driven demand system in Spain, not quite the same. Right, because you get big air conditioning that comes through in the summer. So do you want to kind of describe the dynamics of that.
- [05:08]
B
Yeah, so in Spain we have these seasonal dynamics in which spring and autumn are periods of the year in which we will see less demand, much more so in spring that, in autumn and then we will see demand rise in winter because of the need of heating and in the summer because of the need of cooling down. So, so this is interesting because, so in GB or Germany, for example, it's something that we see a lot more, that demand does not rise as much in the summer. And in Spain what we're seeing is that during the summer it's peak solar generation. But at the same time prices don't necessarily crash during solar hours because demand rises so much more.
- [05:49]
A
And we see that same thing right in Texas, in California, in Australia, because the, the solar generation is matched quite nicely with the air conditioning load. The they don't get that kind of crash off in prices. So that crash off in prices in Spain happens in, in spring. One of the sort of really sort of shocking stats that I've read recently is around the capture rate for solar in February for Spain was 1.30 cents per megawatt hour. So what like for people that don't look at that all the time does is that exceptionally low? How low is that compared to usual? What does that mean for solar projects as well?
- [06:25]
B
So I think it's interesting to compare properly is how much does it cost to deploy new solar. So building a solar site, you could be talking about terms of cost and the returns you would expect for it to be profitable, it would need to be in the range of 30 to €35 per megawatt hour. So if you're getting those returns from your solar asset, then it's reasonable business. So if you compare that 30 to 35 to the capture price in, in February, which was just 1.3 Euros per megawatt hour, that's extremely low. And then what does this mean for renewable developers? Right, what we're seeing is this kind of new dynamic and we've been seeing this over the last two years in which the returns from solar assets during spring are extremely low because of lower demand. But also we've the last two years have been extremely wet, so lots of rain in, in Spain and Portugal have, have made it so that hydro assets behave like any other renewable. So lots of hydro generation pushing prices down and making those, especially during solar hours, those prices very, very low. So if you are solar asset owner, you kind of got used to, okay, spring returns are very, very low. And then I need to make my business case during the rest of the year.
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A
And so, and, and let's just be be frank, right? So that, that sort of €1 30 is, is almost like the, the low point of the year. Right. So the average capture rate for solar is slightly better than that, but it is still kind of, it's quite shocking. Right, so do you think that the 40 gigs or so of solar we've got in Spain now, do you think that's kind of at the peak that it will ever be, or do you think we're going to sort of. There's still momentum in the pipeline, more is going to be added because it feels like if I'm being paid 1, 1 Euro 30, I probably shouldn't add more.
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B
And this is interesting and it comes down on how these assets are really paid. Of course we see some merchant assets that get paid from selling their electricity in the wholesale market, in the dayhead market. But also most of these assets will have some kind of PPA contract. So what that means is that they will get paid a fixed price regardless of the market price. And here we're seeing an interesting dynamic and this contracts evolve over time because let's say legacy contracts did not necessarily account for negative price hours. So we're seeing some contracts that during those hours do no settlement. So basically you go from earning your strike price, let's say €35 per megawatt hour, to zero the moment the price turns slightly negative. Okay, yeah.
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A
And maybe within that you're also saying that the price has also been negative at, at times within Spain. Have you got a rough idea of how many times that's gone negative so far this year?
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B
It's, it's close to 200, 250 hours.
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A
Yeah, that's.
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B
If you compare the number of negative hours so far these years to other European countries, Spain's way ahead, but just because February, it's been very rainy month and overall demand has not been as high.
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A
Okay. And it's like just on those PPAs, right? Because sometimes we have this conversation and somebody says, oh, the wholesale rate has gone low, but I've got a ppa so I'm protected. And I think it's really interesting thing because yes, you are protected, but you've, you've passed the risk to someone else. Someone else is still getting. Someone is someone else out there is still buying solar at €35 per megawatt hour and the value of that on the market is still 1:30. So they still like. So you might not lose the developer who sold it, but the person who's buying that pba, they are definitely losing. Uh huh.
- [10:09]
B
Yeah. So two years ago, capture price for solar on a yearly basis it was close to, let's say €42 per megawatt hour. Last year, 2025, the capture price was close to €34 per megawatt hour. And now this year 2026, it's likely going to close below 30. So capture price for this technology is dropping and what we're seeing is that PPA prices reflect that. So if you're looking to sign a new PPA contract now, it's very unlikely that you find an opportunity above €30 per megawatt hour. And this is interesting because as I mentioned earlier, when you look at the cost of deploying this technology, the returns that you're getting, they're below the cost of deploying new solar. So if the economics make sense, we should see a slowdown in solar deployment just because of market signals.
- [11:02]
A
Are we saying that?
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B
Not necessarily. So what we're seeing is so last year 2025 we deployed 8 gigawatt of new solar, so record deployment in a year and this year 2026 we could see another six gigs added to the system. This is not because the people that are bringing these assets online think that the business case is great. We're seeing clear saturation signals in the market. But if we've learned anything is that the solar industry has a lot more momentum that everyone thought. So these developments take a long time. When you've spent so, so many resources, it might be worse to stop completely than to bring this asset online.
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A
Okay.
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B
And now what we're seeing is that people that have the ability to do so are trying to steer into collocation with storage, for example.
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A
Okay. And I think that's, that's a really interesting thing. Right, so you were saying, right. With a pure play solar ppa, I probably couldn't get that signed today, or if I did it sort of down towards to say the €30 mark. But you're then saying, okay, people are going, right, I need to do something else with that site. I've got solar on it, maybe I could add storage to it. And instead of just doing the solar hours, this site could do the solar hours and some extended hours from the storage. And together that makes a much more attractive proposition for the PPA that someone will be buying. So are you starting to see the market make that, make that turn away from just like the pure play solar?
- [12:35]
B
Absolutely. So it's not only new, new developments that we're seeing, they're trying to collocate with solar. But existing solar assets, they're looking at battery storage as a way out of this solar profile. So at the moment the market is flooded with solar production, solar profiles. And you need to get creative on how do I fix my solar exposure or how could my production shape change when I add a battery on top of that? That would be only thinking about the energy generation. But when you add a battery storage to your solar side, then all of a sudden you're onboarding more flexibility and you are tapping into flexibility services from the, for the grid. So ancillary services and other markets that the battery could participate in and extra revenues.
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A
Okay, we're definitely going to come back to ancillary services later on as we invariably like march towards talking about the Iberian blackout from last year. But we're going to, we're going to move that slightly later. The conversation actually just want to, just want to take this kind of trend through. Right. So Spain has got a really good track record of building solar. Actually, like I think sometimes when people think about Spain, they think about sort of slower deployment. And yet 5, 6, 7, 8 gigs of solar being deployed each year is a really good track record, but less of a track record. Installing batteries. How many batteries have we got today and why has Spain struggled to get batteries installed?
- [14:06]
B
So at the moment connected to the grid, I'd say it's less than 100 megawatts of battery storage. Compare that to GV. So at the moment in GB6ish, 6 gigawatt. So it's completely different order of magnitude. Yet we're seeing lots of appetite from local developers, international investors to push for battery storage in Spain. And there are few things that. So people usually look at Spain and they're like, oh, regulation, it's not great for batteries. Should I be looking to deploy capital somewhere else? And this might have been true two years ago, but 2025 we saw lots of regulatory changes in favor of storage. So now co locating with storage and deploying battery projects should be a lot more straightforward. There are a few last things to iron out in terms of regulation and this has to do with flexible connection and how those batteries charge from the grid. There's right now a proposal from the regulator. They're taking a look at this. Hopefully this gets resolved within the next few months. All of the sudden we find ourselves in a place in which it's a lot more straightforward to. You forgot the solar asset. You collocated with a battery, the battery gets some kind of charging rights and you're good to go.
- [15:27]
A
I think it's pretty interesting to see the system kind of pivot towards getting those batteries in from the regulatory point of view on the money side. So you mentioned that sort of, obviously there are international players looking at the Spanish market. Where is the money coming from? Is it sort of your traditional players in Spain, or is it kind of starting to come up as like one of the hot markets of Europe that people want to put cash into?
- [15:51]
B
Right now, talking with the different players in the market, I can clearly see two different types of investor. So the more aggressive investor, they're happy with the battery business case, they've done it in other markets. They have the experience, they have the exposure, they're looking at Spain, they're like, oh, the fundamentals are great. Ancillary services, returns look great as well. Let's deploy capital and let's do it as quick as possible before these markets cannibalize over time. And then the local developers or the people that did not have as much experience with batteries, they're looking at this like it's an alien. It's a completely different asset class. This is nothing like solar. How would they optimize this? How would they earn money with such an asset?
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A
It is actually crazy, right? So in some systems globally, like California, Texas, Australia, Great Britain, and to some extent places like Germany are moving very fast on this, where it's become almost second nature to think about putting battery storage in. And yet still in some markets where we're still in the early tens or hundreds of megawatts, as you say, people look at this bashty project and go, well, what the hell's this? I still, I'm not familiar with it. I understand it. You know, it always surprises me that the global standard hasn't moved as fast as maybe it should do. But hey, we'll see. Now, we've mentioned ancillary services a couple of times, which is around providing additional services to the grid for, eg, stability. To cover this topic, let's start with the Iberian blackout. And recently we had a report which was sort of the complete report summarising the like, what. What went wrong? So, Pablo, what went wrong in Iberia? And I think, maybe more interestingly for me, what can we do, or what can the system do to get more stability in the future?
- [17:41]
B
So the main reason behind Iberian blackout was voltage control and voltage issues. So what triggered the blackout eventually was that voltage was getting out of control in very specific parts of the system. So we saw oscillations moments before the blackout, but also hours before the blackout. And the TSO was already taking the right steps into stabilizing the grid. The blackout originally started in the south. There was meant to be thermal generators coming online to mitigate this effect a few moments after the blackout. Or let's say a few minutes after the blackout. Right. I think this especially, there was one CCDT that was meant to be scheduled and running one hour after the blackout happened. So it's not like there were no signals. The grid was in a very clear, unstable position and the TSO was taking the right steps to mitigate it. Also talking with France, talking with Portugal, like, hey, we're seeing these oscillations because
- [18:45]
A
they're interconnected and you can do things with your interconnections to give you more stability.
- [18:49]
B
Yeah. But then all of a sudden, what we saw is that because of voltage, some plants started to disconnect that triggered voltage spikes on very specific zones of the grid. And what we saw is that generators started disconnected to protect the assets. What this creates is an effect in which voltage spikes, generators disconnect. And all of the sudden you're losing a very significant amount of your generation in the system. So frequency drops. If there's less generation, the grid tends to slow down, frequency drops, and then you've got also other protections in the system so that more generation and more demand disconnects. And very quickly you find yourself in a situation in which you're missing very key parts of the grid and everything falls after that.
- [19:48]
A
So I think that's a really good explanation of what happened. I think that has been covered, and thank you for covering it. But I think that's been covered a lot in various places, including a very sort of detailed, comprehensive report, if you'd like to read it. But I think what's more interesting is in a system of the future and with the options available to us today, like, how do we get a system like Spain? But this can also apply to lots of other grids. How do we get those types of systems to be more secure, more stable.
- [20:14]
B
Yeah. So what happened right after the blackout was that the TSO started managing the grid in a very different way. So lots more of gas generators, CCDTs turning online. These synchronous generators provide voltage control and inertia to the system by default. So if you've got lots of CCDTs connected and running, you find yourself with a much more stable grid. But if you're doing that, you are displacing renewable generation from the grid in order to allocate those thermal generators. Right. And We've been running like this for quite a while now. And the idea is, okay, how do we revert back to what we had before without compromising grid stability? And what we saw is that right now we've had within last year, we've got a proposal and now the market, it's up in place. It started to work last week for a voltage control market.
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A
Okay.
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B
So it used to be that assets provided voltage control services on a mandatory way.
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A
So the system operator is stepping in and telling that plant to run.
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B
Not necessarily. So you needed to provide it and then you trust the asset owner to have the right tools in place to do so and work within a specified range of active and reactive power as your injecting power into the grid. And now that part remains, but they've added a market on top of that so that you can participate if you want to and earn extra remuneration for that service. And interestingly there was before it was not necessarily specified how if you did not comply with voltage control regulation, you would get penalized. And now they've done so. Moving forward, renewable assets will also be doing this kind of grid stability service and also get paid for it. I like this approach a lot because making it market based means that over time the best technologies at doing so should in a way pull ahead, reducing the reliability on thermal generators to be providing this kind of voltage control stability services.
- [22:27]
A
So in today's world, if you're not necessarily paid for it, there's no signal for it. You'd go, okay, well I'm going to have a type of inverter that is sort of known as a grid following, which does what it sounds like, it follows the grid. You can also have a grid forming inverter, right, which is a voltage source, which is kind of the key difference and that allows you to contribute more to voltage markets like voltage control. Which sounds like I've said voltage a lot, possibly way too much, but I think that is quite an exciting thing. Right, because then I was looking at the technical restrictions or the technical actions that are taken by the system operator in Spain, as you say, many more technical actions were taken after the back out to make sure we had thermal plant running. Wouldn't it be nice if instead of having to rely on some of the thermal plant for that, we could rely on grid forming inverters either from a battery, could be on a solar site, doesn't really matter where it's from, but the inverter technology needs to be there to be able to contribute to those voltage markets.
- [23:19]
B
Yeah, so if anything, the only issue with this new market, so the market design is great, but the remuneration, it's, let's say, on the lower side. Okay, so at the moment you've got a service like this in GB and maybe you can give a little bit more detail on that, the utilization for that service, it's close to €3 or pounds per voltium per reactive. Yeah. In Spain it's one, so it's three to one. Very, very low remuneration for the reactive service. So it brings the question, like, is there even a point in participating in this market? And the interesting thing is they framed it so that if you participate in this market on the voluntary side to it, you get priority of free dispatch. So what this means is that if your solar asset is in lots of curtailment, especially let's say during the summer, so June, July, lots of solar generation, not all solar assets can inject into the grid at the same time, the TSO will step in and reduce the solar production of some of these assets. If your asset is one of the ones helping the grid because of voltage control, then you will get that priority of redispatch. So the value, really, it's not on the reactive service itself, it's on the active energy that now you're able to produce that you would have otherwise lost.
- [24:41]
A
Yeah, that's, that's super. That's super interesting. And I suppose, I imagine if you're then under like a PPA structure. Taking us back to earlier part of the conversation, even if the power price is low, your ppa, because you can flow volume through your PPA structure, you might still get paid. And so there's like extra value that comes out of that that's hard to untangle. You asked for like a sort of version from the GB side. Yeah, absolutely. I mean, one thing that the GB system and RTSO transmission system operator is doing extremely well is looking at each of these parts of the market, whether it's short circuit level, whether it's voltage control, and we're putting that into a market. And I think that then allows people to then structure products or structure sites, batteries, solar, whatever it might be, to then go and try and provide these services. I think that is a really good blueprint for nearly all system operators, which is to say you probably, system operator, without being rude, you don't know all of the potential sites that are out there and all the potential technologies that can come through and all of the potential configurations of inverters that you might be able to use and in the absence of that information, make a market and then see what comes through and then you'll get much better information about what can provide these things. So I, I like, I really like the approach. As you say, if you only pay sort of in the order of €1 for it, then yeah, there's a, there's a question mark whether people will actually do it. But let's see, let, let the market run. Let the market find a level. You know, low prices is a cure prices. So we shall see.
- [26:10]
B
Having said that, as of today, as we're starting with this new market, I think in this first round, 80 assets complied with the requirements and started to provide this service. And then there's close to another 300 trying to comply and participate in this market. So there's a clear drive from asset owners to enable and participate in this service.
- [26:33]
A
Okay, okay. Which brings me on to my last question. So, Pablo, I'd like a contrarian view from you about the Iberian market, or more broadly, you could go Europe if you like. What's the contrarian view that you hold
- [26:45]
B
based on the latest geopolitical events we've seen? I've seen a lot of people in Europe talk about our dependency on gas and gas prices and usually people point at Spain as Spain has done such a good job of decoupling from gas prices. And there's a caveat to it, like if you're only looking at the day ahead market and the power prices, sure, we've done a very good job at reducing our dependency on gas. And these days you, it's very rare for gas generators to be clearing their bids in the day ahead market and therefore selling their energy into the market.
- [27:26]
A
That's like 5 to 10% of the time.
- [27:28]
B
Yeah. Very little throughout the year. But having said that, what we're seeing, it's a very significant activation from these gas generators, as we mentioned, especially after the blackout, through technical restrictions and technical restriction markets. So it's not like Spain is not using gas or not running lots of gas generation. It's still very much embedded in the system and the way we, we manage the grid, it's just not showing on the headlines because it's not on the market.
- [27:57]
A
Yeah, this is so interesting. Right, so this, I'm sorry, this is getting a bit, this is, this will get a bit niche for people. But like, please do bear with it because I think it's a really interesting concept, right, which is that essentially in most markets your gas units will get turned on in the day ahead market. So the day before and when that market clears, you'll give instructions to the gas units to run and then what that will do is it sets the sort of day ahead price at whatever the gas level is. So then people say, oh, gas is connected, the price of gas is connected with the price of power. And if gas prices are very high as they are at the moment, then consumers end up paying more money for that. What you're saying is actually sometimes those gas units, because they're not really needed for energy, they don't clear in the day ahead market, but the system operator still needs them. And so in like a balancing market closer to delivery, they get called on but that doesn't set the power price. That goes into a separate sort of bucket around sort of balancing costs. I actually wonder if that's a bit of a blueprint as we get sort of further away from the market exists today. I think a few systems might actually look at something like that where they, where they take the technical, the technically needed gas units for whatever reason they're needed, try and take them out of their head market so they have less influence in there and try and move them more into like a balancing type service.
- [29:12]
B
Absolutely. In fact, so, so this would be one step, right? So you're removing this thermal gas generator from the system in the day ahead market because as you said the energy itself is not as needed anymore. And now we're in this second phase in which they're still needed for grid stability. Then what the third phase might look like is that as, as we onboard these, as we mentioned, voltage control market or balancing services such as within the European framework, we call it Picasso, so afr, so frequency response services, as we have more renewable assets or batteries in that case providing this service, then we're displacing these thermal generators even further. And it might be that they turn online very little, just on very specific moments of time which there's no renewable source and then you really need them for the grid to continue running.
- [30:07]
A
It's a big fundamental question across nearly all markets which is what do you do with the gas units when they go from running sort of a base load 247 shape. Sometimes they do what's called two shifting. So they kind of turn on in the mornings and evenings and then in the sort of Spanish world, well, maybe they only turn on a few times a year. Well how do you make sure those units are there? It's kind of a. We don't have time for this conversation today. But for the things like capacity markets or things like strategic reserves are all starting to come out as ways that we could pay for these sites. Pablo, we very grateful for coming on, talking us all through Spain. We have more episodes on Spain coming up soon. So for listeners and viewers, keep an eye out for those. And if you're in Madrid and would like to catch up with Pablo and team, then do reach out because I know he'd be delighted to talk all things Spanish power with you.
- [30:56]
B
Thank you very much.