OBS Report: The energy sector in Spain, towards sustainable decarbonisation
The closure of nuclear power plants will increase the cost of living by 23%
- It is urgent to invest in digitalisation and electricity storage to mitigate economic risks that could reach billions of euros in key sectors such as industry and services.
- In 2026, electricity consumption will reach historic highs. There will be a large deployment of batteries for storage and the electrical interconnection between Spain and the rest of Europe will be improved.
- The withdrawal of the first 1,000 MW of firm power from Almaraz I will result in a direct increase in the cost of living of 23%; for industry it will mean 35% and for the service sector around 20%.
January 2026. OBS Business School, an institution belonging to the Planeta Formación y Universidades higher education network, publishes the report The Energy Sector in Spain, led by Professor Víctor Ruiz Ezpeleta.
The two-year period 2025-2026 marks a definitive turning point in the global energy transition, which has moved from a phase of mass installation to one of intelligent management and systemic resilience. After exceeding the 50% renewable generation barrier in Spain in 2024, the sector now faces the challenge of operational stability in an environment of high power electronics penetration and low conventional inertia. Last April's blackout revealed critical vulnerabilities in the system. Although decarbonisation is now an unstoppable reality, it is technically more complex than initially anticipated.
On the one hand, there is the ‘tyranny’ of investors, who must assess the risks when investing their money in renewables that are cheap but whose integration without synthetic inertia creates systemic risk. On the other hand, there is the imbalance that has arisen between sustainability, affordability and security, which must once again become the priority in infrastructure investment. And finally, there is the challenge of managing millions of pieces of data in real time and the need for instant ‘curation’ algorithms.
Therefore, it is not enough to install renewable power; it is essential to provide the system with backup mechanisms and dynamic stability. The blackout that occurred in April 2025 in Spain and the incidents in Chile underscore the urgency of investing in digitalisation and storage to mitigate economic risks that can reach billions of euros in key sectors such as industry and services. The near future requires a holistic vision that combines energy efficiency, self-consumption and active demand management. Only through a smart and well-interconnected electricity grid can a sustainable, secure and economically competitive supply be guaranteed.
Energy sector forecasts for 2026
The sector's top priority for this year is grid flexibility and modernisation. Electricity consumption is expected to reach historic highs, driven by the electrification of transport, industrial heating and, in particular, massive demand from data centres dedicated to artificial intelligence. There will be a large-scale deployment of battery energy storage systems (BESS) and the installation of batteries to act as frequency ‘buffers’ and manage solar intermittency will be accelerated. Technical regulations will be established requiring renewable plants to integrate inverters capable of simulating the inertia of traditional synchronous machines, thus preventing collapses in the event of grid disturbances. Efforts will be made to increase interconnection between Spain and the rest of Europe to above 10%, a strategic priority to break our country's status as an ‘electricity island’. Green hydrogen projects such as H2med and the hubs in Chile (Magallanes) will be consolidated, moving from the pilot phase to industrial scale, with a focus on the export of e-fuels.
The current situation
The energy blackout that Spain suffered last year demonstrated that there was insufficient interconnection infrastructure. Today, Spain continues to fall short of the EU target of at least 10-15% exchange capacity with neighbouring countries. For this reason, it has been proposed to strengthen the trans-Pyrenean interconnection by prioritising submarine cable projects in the Bay of Biscay to increase exchange capacity to over 8,000 MW.
Furthermore, there is a lack of large-scale storage capacity. When the blackout occurred, Spain only had 8 GW of storage (mainly pumped hydro), which was insufficient to absorb a 15 GW fluctuation in seconds. The Massive Battery Plan (BESS) seeks to accelerate the installation of at least 20 GW of battery storage that will act as a frequency ‘buffer’ before 2030.
To prevent similar situations from recurring, the OBS report states that new renewable plants should be required to use grid-forming inverters that simulate the inertia of traditional synchronous machines. It also recommends implementing artificial intelligence algorithms in control centres to predict and isolate faults in microseconds, long before they become systemic.
What will the closure of nuclear power plants entail?
At the beginning of 2026, nuclear energy continues to be an important part of energy generation in Spain. Despite the growth of renewables, nuclear energy guarantees frequency stability. Its closure will raise the wholesale market price and increase emissions by having to burn more gas in combined cycles to fill the gap. Perhaps we can learn from the German experience, as Professor Ruiz Ezpeleta states:
"Germany has achieved a record share of renewables (62%) but at the cost of having the most expensive industrial electricity in Europe and a critical dependence on interconnections with countries that do have nuclear power (such as France and the Czech Republic)."
Without the inertia of large nuclear turbogenerators, events such as that of 28 April 2025 could be repeated if grid-forming inverter technology is not deployed on a massive scale. Furthermore, decommissioning will result in the loss of thousands of highly skilled technical jobs that are unlikely to be absorbed by the renewable energy sector, which is less labour-intensive.
The year 2027 will mark a turning point in the Spanish wholesale market. The withdrawal of the first 1,000 MW of firm power from Almaraz I will alter the supply curve, shifting the balance towards more expensive technologies at times of low renewable production. For consumers, this will translate into a direct increase in the cost of living of 23%; for industry, it will mean a 35% increase, and for the service sector, around 20%.
