AleaSoft Energy Forecasting, October 27, 2025. Interview by Ramón Roca, director of El Periódico de la Energía, with Antonio Delgado Rigal, PhD in Artificial Intelligence, founder and CEO of AleaSoft Energy Forecasting.
If the markets were not volatile enough, in April we had a blackout that changed everything again. How is the market evolving after Red Eléctrica reinforced its operation?
The blackout on April 28 was a turning point that led Red Eléctrica to strengthen its operating procedures and prioritise system security. This has translated into greater technical requirements for generators, particularly renewable energy plants. Since then, grid management has become more conservative, more importance has been given to dispatchable technologies and episodes of renewable energy curtailment have increased at certain times.
At the same time, this new context may also open up opportunities: renewable energy plants are now participating in some ancillary services that are better remunerated, which can partially offset the loss of income caused by the restrictions.
In this scenario, hybridising renewable energy plants, especially photovoltaic ones, with battery storage systems becomes key. Batteries make it possible to better manage the energy injected into the grid, reduce curtailment and provide flexibility to the system. Moreover, thanks to power electronics, they help strengthen the stability and security of the electricity system by participating more actively in ancillary services and grid operation support. Therefore, the combination of renewable energy generation and storage represents a natural evolution towards a safer, more efficient and more sustainable system.
The system operator has requested some changes to the operating procedures. Could this affect electricity prices in Spain?
Yes, without a doubt. Any operational change has an impact on prices, especially when it affects the available supply in the market. To the extent that stricter technical restrictions or higher reserve and control requirements are introduced, the result may be an increase in ancillary service prices during certain periods, particularly in the hours of greatest system stress.
However, the net effect will also depend on the development of storage and demand flexibility. In the medium term, more demanding but also clearer operational rules can promote safer, more predictable and more efficient operation.
In addition, this new operating framework could accelerate the deployment of storage systems and flexibility solutions, both by generators and consumers. Batteries, thanks to their fast response capability, are becoming increasingly valuable for providing reserves and balancing services. Likewise, flexible and manageable demand —such as electro‑intensive industry or data centres— will be able to participate actively in system balancing, benefiting from higher remuneration for their response capacity. All this will help stabilise the market and maintain more competitive prices in the long term.
What is your view of Spain’s grids? Do you agree with the 2030 Grid Plan? Will the remuneration be sufficient to carry out those investments?
We see the grids as the main bottleneck for decarbonisation. At present, there are significant difficulties in accessing nodes, both for new renewable energy generation projects and for new clean demand, particularly the electrification of industry, data centres and battery storage systems. The transmission and distribution grids are reaching saturation, limiting the pace of new connections and, therefore, the progress of the energy transition.
Spain has made a major effort in grid planning, but the great challenge now is implementation. The Electricity Transmission Grid Development Plan 2025‑2030 is heading in the right direction, with a more integrated vision of the electricity system and a better identification of connection needs for renewable energy, storage and new demand such as data centres or green hydrogen.
The planned remuneration for the grids has been partially improved. The CNMC has proposed increasing the financial rate of return from 5.58% to 6.46% for the next regulatory period (2026‑2031), which is a step forward compared to the previous framework. However, distribution companies consider that this level remains insufficient to mobilise the necessary investment in reinforcement, digitalisation and modernisation of the grid. They call for greater regulatory stability, remuneration more aligned with actual costs and explicit recognition of investments in flexibility, storage and resilience.
Unless investment and innovation in the grid are properly incentivised in areas such as advanced monitoring, dynamic capacity management and integration of distributed resources, it will be very difficult to meet the NECP targets and ensure a resilient and secure system. The grid is the backbone of the energy transition, and its modernisation is as important as the deployment of new renewable energy generation.
The capacity market seems to be stuck in Brussels. Is it so essential for batteries?
It is essential. Batteries need a framework that recognises and remunerates the value of firm capacity and flexibility that they provide to the electricity system. The capacity market is the instrument designed to reward that availability, compensating technologies that can guarantee supply during periods of scarcity or high demand. Without such a mechanism, many storage investments would not be economically viable, as revenues from wholesale and balancing markets alone are not enough to cover capital and operating costs.
It is understandable that Brussels wants to ensure that the Spanish design of the capacity market complies with European competition rules and does not create distortions in the internal market. However, final approval is urgent: the sooner it is activated, the sooner many projects awaiting a clear and stable long‑term revenue signal will be able to reach financial close.
Moreover, the capacity market will not only benefit batteries. It will also encourage participation from dispatchable technologies, flexible demand and renewable‑storage hybrid solutions, strengthening security of supply and the stability of the electricity system in a context of high renewable energy penetration.
In this regard, batteries hybridised with photovoltaic energy plants will play a particularly relevant role. These facilities will be able to make use of existing infrastructure and optimise grid connection, improving the overall profitability of the project. In addition, by combining generation and storage, they will be able to offer firm capacity and ancillary services that, in some cases, may be more competitive than stand‑alone systems, thus contributing decisively to the balance and flexibility of the electricity system.
When will we see a “boom” in batteries in Spain?
Within the next two years. We are already seeing exponential growth in access requests and projects at an advanced stage, but the real “boom” will come when the capacity market becomes fully operational and financial institutions start funding merchant or partially merchant projects with greater confidence.
At AleaStorage we are observing enormous interest from investment funds, utilities and IPPs seeking to position themselves in this segment because they understand that storage will be the key component of the new electricity system. Batteries will enable greater renewable energy integration, reducing curtailment, participating in ancillary services and providing flexibility to the system.
Furthermore, storage development will not be limited to stand‑alone projects but will also include hybrid photovoltaic or wind energy plants that make better use of existing connections and optimise revenues. As regulation advances, the capacity market consolidates and equipment prices stabilise, we will reach a turning point in investment and actual project construction.
Will they end up cannibalising each other, as some say? How long could that take?
It is inevitable that, over time, there will be some degree of cannibalisation, as happens with any technology that grows rapidly and becomes concentrated in the market. However, batteries have a key advantage over other technologies: their ability to participate in multiple markets —energy arbitrage, ancillary services, capacity, congestion management or even local grid services— which allows them to diversify revenue streams and mitigate this effect.
In the short and medium term, within three to five years depending on the pace of deployment, there is room for many profitable projects, especially in locations with high price variability or grid constraints. The key will be a sound operational strategy and the combination of different revenue sources depending on market conditions.
In the longer term, when storage penetration is much higher, competition increases and the market matures, profitability will largely depend on operational optimisation and the ability to anticipate prices and volatility. In this respect, the use of accurate forecasting models and the integration of Artificial Intelligence in asset management will be decisive factors in maintaining profitability and standing out in a more mature market.
At AleaSoft, we are analysing numerous battery and hybridisation projects and continue to observe very interesting profitability levels. It should be noted that battery prices have dropped significantly and will continue to fall in the coming years, improving the economic viability of projects. Moreover, the real long‑term value lies in having a grid connection point, an increasingly scarce resource in an electricity system with a finite grid that will eventually reach saturation levels.
One of the flagship measures for next spring will be the new Operating Procedure 7.4, which will finally allow renewable technologies to control voltage. What impact will that have on electricity prices as restrictions are reduced?
It will be a major improvement. The new Operating Procedure 7.4 will allow renewable energy plants to participate actively in voltage control and contribute to grid stability. Until now, this function mainly relied on dispatchable power plants, limiting renewable energy integration in certain areas. Under the new regulation, photovoltaic and wind energy facilities will be able to provide voltage regulation through power electronics, thereby reducing the number of technical restrictions and renewable energy curtailments.
This will mean a more efficient use of renewable energy generation and a lower dependence on conventional technologies to ensure system stability. Consequently, it will tend to reduce the average electricity price and CO₂ emissions by making better use of available renewable energy.
Furthermore, this step marks a paradigm shift: renewable technologies will cease to be considered “non‑dispatchable” and become active participants in system operation. In the medium term, the ability to control voltage, frequency and reactive power will be a decisive factor for the massive integration of renewable energy and for security of supply.
On the other hand, the new P.O. 7.4 will promote hybridisation with batteries and the deployment of storage systems. Batteries, thanks to their power electronics, can immediately contribute to voltage and frequency control, providing fast regulation and grid support services. This will allow hybrid plants of solar photovoltaic energy with batteries not only to optimise their energy curtailments but also to become key elements in the stability of the future electricity system.
Is Spain’s problem one of demand? Would that solve many of the current issues?
Indeed, Spain has a structural demand problem. Over the past twenty years, electricity consumption has barely increased, while renewable capacity has multiplied. This imbalance between supply and demand lies at the root of many of the current challenges facing the electricity system.
If the electrification of the economy —mobility, industry, heating and new uses such as data centres or green hydrogen— does not accelerate, it will be very difficult to take full advantage of the available renewable energy generation potential. Increasing electricity demand is essential to avoid recurring zero or negative prices and to ensure an adequate return on renewable energy and storage investments.
Higher demand would also allow for more efficient system operation and a more balanced use of the grid, reducing curtailment and improving stability. The massive electrification of industry and transport, together with the development of storage, will be the pillars for consolidating a decarbonised, sustainable and economically viable energy model.
At AleaSoft we continuously analyse different electrification scenarios, all of which point to a very significant increase in electricity demand in the coming years. The expansion of data centres, renewable hydrogen production, electric vehicle charging and the progressive replacement of fossil fuels with electricity will lead to substantial consumption increase. This growth will be key to absorbing renewable energy generation, sustaining prices and ensuring the economic viability of storage and clean generation investments.
Do you expect electricity demand to increase in Spain in the coming years? Could you estimate by how much?
Yes, definitely. Electrification is beginning to take off and will accelerate as technology costs fall, confidence in long‑term electricity prices increases and regulatory incentives become more established.
At AleaSoft, we estimate cumulative growth in electricity demand of around 15% to 20% by 2030, driven mainly by new industrial consumption, digitalisation, data centres, electric mobility and renewable hydrogen production. This growth will be gradual but sustained, marking a turning point after the last twenty years of practically stagnant demand.
At AleaSoft, we have also projected that once the economy is fully decarbonised, electricity demand could triple compared to current levels, not including additional demand for energy exports or energy products such as hydrogen or e‑fuels. This growth will reflect the full electrification of industry, transport, heating and other energy uses currently dependent on fossil fuels.
Moreover, the combination of higher demand and greater flexibility, thanks to storage and intelligent consumption management, will enable better use of renewable energy generation, reduce curtailment and improve system stability. Ultimately, demand growth will be one of the pillars that make the success of Spain’s energy transition possible.
When will zero or negative prices disappear? Or are they here to stay?
They will continue to occur, especially in spring and autumn, when high solar and wind energy production coincides with moderate demand. As long as generation exceeds consumption at certain times of the day, zero or negative prices will remain a natural part of market functioning.
The key point is that as battery systems are deployed, interconnection capacity increases and electricity demand grows due to electrification, these episodes will become less frequent and less intense. Flexibility will be the tool that cushions volatility and stabilises prices, turning what is currently a challenge into an opportunity for a more efficient and sustainable system.
It often feels like electricity in Spain is always expensive, is that really the case? How can we help existing electro‑intensive consumers and new industrial consumers that are coming?
Spain does not have structurally expensive electricity; the issue is that the final consumer price includes a high burden of regulated, fiscal and tariff components that distort the market signal. The pure generation cost, especially during solar and wind hours, is increasingly competitive, but the additional system costs make consumers perceive electricity as more expensive than it actually is in energy terms.
For electro‑intensive consumers, long‑term contracts (PPAs or CfDs) remain the best tool to stabilise costs and ensure competitiveness. These instruments protect against market volatility and secure predictable prices, essential for industries with tight margins and continuous consumption.
Moreover, it would be highly beneficial to promote the development of new industrial hubs near areas of high renewable energy generation. This industrial relocation would allow the use of lower local prices, reduce grid costs and minimise transmission losses, while simultaneously driving regional economic development.
Industry can become one of the main beneficiaries of the energy transition if pricing policies and electrification incentives are properly designed. At AleaSoft, we are seeing more and more industrial companies seeking long‑term green supply agreements and energy management strategies that enable them to compete in an environment where electricity will be the main energy source.
What do you think about the Government’s plan to carry out stress tests on retailers to assess their preparedness for energy price crises?
It is a prudent and necessary measure. The experience of 2021 and 2022, with episodes of extreme volatility and record prices, showed that not all retailers were prepared to manage market risk adequately. Some players faced serious difficulties in covering their positions or fulfilling customer commitments, creating tensions within the system.
Conducting stress tests will help identify weaknesses, anticipate potential problems and strengthen the sector’s solvency. It is a common practice in other financial sectors and its application to the energy market will help protect both consumers and the overall stability of the system.
At AleaSoft, we believe that transparency, professional risk management and long‑term price forecasting are essential tools for strengthening the retail sector. A deep understanding of the market and proper planning allow retailers to make safer and more sustainable decisions, avoiding vulnerability during energy crises.
In addition, AleaSoft provides a set of tools and services specifically designed to help retailers better manage their risk exposure, optimise their hedging and plan purchase and sale strategies over different time horizons. Our price forecasts, probabilistic scenarios and market analyses provide the information needed for solid, transparent and long‑term‑oriented management.
Source: AleaSoft Energy Forecasting.
