Spain is rapidly becoming a hotspot for investment in energy storage. As the country continues its transition to renewable energy sources, demand for flexible grid-balancing solutions has generated growing interest in battery energy storage systems (BESS).
A recent M&A Community webinar examined the factors shaping this evolving landscape, including investor appetite, M&A activity and impending regulations such as the Capacity Market.
Hosted in Spanish by Tomás García, Head of Energy & Infrastructure Advisory for Iberia at JLL, the webinar also featured:
- Pablo Otín, Principal at PMOP Consulting
- Mikel Pino, Head of Energy Storage Europe at Exus Renewables
This article shares key takeaways from their discussion, providing an insight into the future of energy storage in Spain.
1. The urgency to scale up storage is mounting
Spain’s rapid deployment of solar energy has created a paradoxical situation in which operational solar plants are facing low capture prices and frequent curtailments. Consequently, hybridization – i.e. combining solar assets with batteries – is becoming essential.
“We’re seeing many solar plant owners already adding batteries or preparing to do so,” noted Tomás García. “And standalone BESS development is also surging, with around 13 GW already granted grid access, according to data from network operators.”
The blackout earlier this year further underlined the urgency. “It was a wake-up call,” added Mikel Pino. “It showed the grid’s vulnerability and the need for assets that bring flexibility and resilience.”
2. The Capacity Market: promise and uncertainty
Spain’s proposed Capacity Market, a scheme that would reward assets capable of providing grid stability, is a major talking point for investors and developers alike. But while expectations are high, so is uncertainty.
Pablo Otín cautioned: “We know the basics: there are three types of auction, CO₂-emitting technologies are restricted, and the scheme will not be compatible with other public support. However, many critical details are missing, such as price levels, contract durations, definitions of stress hours, and financial guarantees.”
While the market could provide stable revenue streams for battery projects, Otín warned against over-reliance: “If your entire business case depends on the Capacity Market, that’s dangerous. We need a flexible, resilient storage ecosystem that doesn’t depend on a single regulation.”
Pino agreed that, although the Capacity Market could facilitate short-term financing, the more pressing challenge lies elsewhere. He emphasized the need to reform Spain’s energy system so that it properly values the technical strengths of battery storage, such as its ability to respond within milliseconds, through existing ancillary service markets.
3. Investor appetite is booming, but so is frustration
There’s no shortage of capital. The panel reported great interest from utilities, infrastructure funds, and private equity players in Spain’s energy storage space: “Almost every week we’re contacted by investors looking for storage projects,” said García. “But transactions are still limited, as there’s not enough mature, high-quality product ready for M&A.”
According to the panellists, challenges include the scarcity of large-scale, ready-to-build projects and ongoing concerns around land suitability and permitting. Still, they expect M&A activity to accelerate significantly over the next months as more projects reach maturity.
García noted that many project owners lack the capital or capabilities to take projects through development and construction, which means M&A will likely play a central role as assets transition from early developers to more established players.
4. Energy optimizers are critical to de-risking
With the industry still in early stages, contracting revenues is essential to unlock financing. That’s where energy optimizers come in.
“These players will be fundamental,” said Otín. “A battery without intelligence loses money, or worse, it does nothing. Optimizers can provide contracted revenue streams through tolling, floor contracts, or shared upside models.”
Nevertheless, Spain is lagging behind the UK and Germany in developing this market. Although there has been some initial activity in the energy optimizer sector, the panel was in agreement that the market in Spain remains underdeveloped. However, they also recognized this as a significant opportunity, suggesting that Spanish companies could take the lead, given that many international players are still focused on more mature markets.
5. Spain’s market structure needs to catch up
Looking across Europe, Spain has both room to grow and lessons to learn from its neighbours. Germany’s decentralized incentive schemes and the UK’s history with capacity auctions offer useful reference points.
Future regulation should prioritize flexibility, not only in terms of capacity, but also in recognizing the speed and responsiveness that storage technologies provide.
Beyond regulation, one of the most pressing challenges remains the administrative burden associated with permitting. As Otín put it, the government’s top priority should be to fix the bureaucracy: “Tramitación, tramitación, tramitación,” referring to the urgent need to streamline permitting procedures.
Looking to the future
Spain’s energy storage market is at a tipping point. Investor interest is intense, regulatory developments are on the horizon and the country’s reliance on solar power is creating ideal conditions for growth.
However, for the sector to truly take off, key uncertainties, particularly concerning the Capacity Market and permitting processes, must be resolved. If these issues are overcome, Spain could develop into one of Europe’s leading storage markets in the coming years.
