Expectations for cost reductions in renewable energy, both solar and wind, have shifted in the Spanish market.
While over the past decade the development of wind and solar projects was marked by a downward trend in CAPEX, signs now indicate a shift in direction.
According to industry sources, costs have hit a floor and have started to rise again, creating challenges in profitability and investment planning. "No CAPEX reduction is expected in the coming years," developers warn. The prices of solar panels have increased, structures are becoming more expensive, and labor costs continue to rise. According to estimates from sources consulted by Strategic Energy Europe, increases range between 5% and 10%, driven by high demand for projects under development and a shortage of available EPC contractors to execute them. Market Volatility and Its Impact on Costs One of the main factors affecting renewable energy investment is volatility in commodity markets.
While in recent years the costs of photovoltaic modules and wind components had been trending downward, the scenario has changed.
Chinese-manufactured solar panel prices have already normalized after a drastic drop due to production overcapacity, which brought prices down from 0.20/W to less than 0.12/W in 2023. Companies like the Spanish firm Solaria reported purchases towards the end of 2023 at 0.093/W, representing a 62% decrease compared to 2022.
In this first quarter of 2025, a natural price increase due to stabilization was already expected.
Nevertheless, this is compounded by the rising costs of structures and labor, as well as increased demand for contractors, giving these actors more power in setting prices and delivery timelines.
In the wind sector, the situation is even more complex. Manufacturers are facing profitability and quality issues with their turbines, leading to price adjustments. Additionally, there is a growing European protectionism, aimed at curbing the entry of Chinese wind turbines to support local manufacturers.
For developers, this could hurt competitiveness and keep costs high in the short and medium term. The Challenge of Amortizing Renewable Investments The profitability of renewable projects largely depends on amortization periods and the market price of energy.
However, with CAPEX rising and PPA prices dropping, the business equation is becoming more challenging.
Industry sources indicate that Power Purchase Agreements (PPAs) have shown lower prices compared to previous years, reducing developers' profit margins.
Additionally, the lack of new auctions limits revenue predictability, as the Government believes that the market can self-regulate without additional incentives and assume its own risks.
In this context, companies that managed to secure PPAs in 2021 and 2022 hold a competitive advantage, while those looking to sign agreements now face less favorable conditions, with nearly twice the price difference per MWh.
An October 2022 report by LevelTen Energy revealed solar PPA prices at 68.57/MWh, while wind reached 78.50/MWh. Today, the market registers agreements at 35/MWh for solar and between 40 and 45/MWh for wind. Grid Connection Barriers: An Additional Obstacle Another critical issue in the development of new renewable projects is access to the electricity grid.
Currently, dozens of gigawatts of power are awaiting connection, creating uncertainty and slowing down investments.
According to industry association estimates, there are over 40 GW of renewable capacity awaiting connection authorization between distribution and transmission grids.
This situation has led to a lack of clear investment signals, compounded by a regulatory framework that has yet to efficiently resolve capacity allocation in electrical nodes.
Industry sources stress that developing demand is key to absorbing the renewable energy oversupply.
However, barriers still exist to industrial electrification and the expansion of sectors such as electric mobility, data centers, and green hydrogen. "If grid connection points are not released, we won"t be able to move forward with viable new projects," warn industry sources, emphasizing that public administration should prioritize this issue in its energy transition agenda. Conclusion: A New Phase for Renewable Investments Spain"s renewable energy sector is facing a paradigm shift.
After years of declining costs, CAPEX in solar and wind has reached its reduction limit and is now showing signs of rising.
With PPA prices falling, costs rising, and grid connection barriers increasing, investors and developers will need to recalibrate their strategies to maintain project profitability.
In this new scenario, regulatory stability, efficient cost management, and diversification of revenue sources will be key factors in sustaining the growth of Spain's renewable energy sector.
Por Florencia Guglielmetti
Por Energía Estratégica
Por Matías Medinilla
Por Emilia Lardizabal
