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Demand, the great forgotten side of the energy transition

AleaSoft Energy Forecasting, March 22, 2024. The AleaSoft Energy Forecasting’s webinar, with the participation of EY, highlighted the necessary growth in electricity demand for the energy transition. The importance of boosting decarbonization projects and the key role of electricity infrastructure in this process were discussed. In addition, areas such as green hydrogen production, infrastructure electrification and data centers, which promise to significantly increase electricity demand, were highlighted.

The 42nd edition of the monthly webinars organized by AleaSoft Energy Forecasting took place on Thursday, March 14, with the outstanding participation of EY for the fourth consecutive year. In addition to providing an exhaustive analysis of the evolution of the energy markets, on this occasion special attention was devoted to the state of development of renewable energies in Spain, key regulatory changes, the PPA market, subsidies for green hydrogen projects, conditions of financing for renewable projects and the valuation of renewable asset portfolios. Those interested can request a recording of the event through AleaSoft’s website.

Energy sector challenges in 2024

This year 2024 presents significant challenges for the energy sector, according to EY’s vision. During the webinar, Marta Sánchez, EY partner, detailed the most relevant issues in the sector. Although the development of renewable energies continues to be aligned with the objectives of the Integrated National Energy and Climate Plan (NECP), the recent evolution of electricity market prices generates uncertainty about the speed of development of new projects.

AleaSoft - Main topics energy markets 2024 EY

Related to the development of renewable energies, Marta highlighted the crucial importance of decarbonization projects and how the Strategic Projects for Economic Recovery and Transformation (PERTE) should boost industrial demand for electricity, which is expected to grow significantly.

A fundamental aspect linking renewable energy production with the increase in electricity demand is the development of electricity transmission and distribution grids. It is crucial that companies are able to anticipate the grid development and that the current investment limits that constrain this development are extended or removed.

Regarding regulatory aspects, the definitive implementation of the capacity market and the remuneration model revision to facilitate the necessary investment in the development of the grids are awaited.

According to EY, the extension of milestones for renewable projects following the publication of Royal Decree‑law 8/2023 will imply a reactivation of mergers and acquisitions (M&A) activity in the renewable energy sector in Spain. Regarding PPA, Spain remains a very attractive market due to its large supply of projects and attractive prices, and it is expected to remain so in the coming years and months.

Without decarbonization nor increase in demand, there is no transition

Specifically on the necessary boost and growth of electricity demand as one of the key objectives for decarbonization and energy transition, EY experts discussed additional factors beyond the electrification of industry. Among the most important are the penetration of heat pumps for heating and cooling and the development of the electric vehicle charging grid.

AleaSoft - Electricity demand challenges EY

Specific projects such as the green hydrogen production, data centers and the electrification of other large infrastructures such as seaports, which will significantly increase the electricity demand, were highlighted.

Also related to demand, there are the energy storage objectives. It was emphasized that their implementation is lagging behind the NECP objectives and that some regulatory aspects such as capacity markets have yet to be defined. All this together with the demand flexibility are aimed at helping in the electricity system management and taking advantage of the opportunities for competitive prices offered by renewable energies.

AleaSoft Energy Forecasting’s analysis on the prospects for energy markets in Europe and the energy transition

The next edition of the monthly webinars organized by AleaSoft Energy Forecasting and AleaGreen will focus on energy storage. The 43rd edition will take place on April 11 and will feature the participation of Raúl García Posada, Director at ASEALEN, the Spanish Energy Storage Association. In addition to the usual review of the energy markets, the state of the regulations, the current situation and the prospects for energy storage projects in Spain will be analyzed.

Source: AleaSoft Energy Forecasting

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