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AleaSoft Energy Forecasting, September 6, 2023. Interview by Milena Giorgi from Energía Estratégica España with Oriol Saltó i Bauzà, Associate Partner at AleaGreen.

Oriol Sal- to Bauza Associate Partner AleaGreen

In the report on the state of electricity demand, recently published by Red Eléctrica España, it is stated that in the first eight months of the year, a peninsular electricity demand of 154 075 GWh was registered, 4.3% less than that registered in 2022. In this regard, in an interview with Milena Giorgi from Energía Estratégica España, Oriol Saltó i Bauzà, Associate Partner at AleaGreen, reviews the course of recent years and points out the decoupling of demand from economic growth, driven by factors such as energy efficiency and the crises.

Likewise, he notes that to boost electrification, measures are required to incentivise both electricity production and demand, as well as a transition towards green fuels such as green hydrogen in the industry.

How would you describe the evolution of demand in the Spanish electricity market in recent years?

Since around 2015, we have observed a clear decoupling between electricity demand growth and GDP growth in Spain.

Despite the fact that from 2015 onwards, GDP began to recover and grow at a similar rate to the years prior to the 2008 financial crisis, electricity demand registered significantly slower growth, mainly due to improvements in efficiency energy.

Then, the COVID‑19 pandemic in 2020 negatively affected demand, followed by the 2022 energy crisis, which further reduced demand due to high prices that affected industry’s competitiveness and concerned consumers.

In 2023, we continue to see this trend.

What do you consider to be the main causes?

In 2023, even though prices are lower than in 2022, they are still significantly higher than pre‑2022 levels (or pre‑2020 levels to exclude the COVID‑19 crisis that resulted in abnormally low prices).

The industry and its demand have not yet fully recovered.

On the other hand, there is also the impact of the increase in self‑consumption, especially during the months with larger solar radiation.

Self‑consumption is registering exponential growth, and each unit of self‑consumed energy represents less demand on the grid.

What measures or incentives do you think should be implemented to promote electrification?

Until now, the focus has largely been on encouraging production, through incentives for self‑consumption.

However, for a smooth energy transition, it is also essential to encourage electricity demand.

In this sense, it is important to encourage the adoption of heat pumps to electrify both cooling and heating in homes, as well as to promote the uptake of electric vehicles, as is already being done.

Furthermore, in the industrial field, it is necessary to electrify all industrial processes that can be electrified and, for those that cannot be electrified, as in the case of processes that involve gases or high temperatures, the use of green fuels must be promoted, in particular, green hydrogen. The increase in demand for green hydrogen will play an essential role in increasing electricity demand.