Bright days and intermittent challenges ahead
European countries have seen record lows for solar profitability this year and Spain is no exception. The blackout it experienced on April 28 is more a symptom than a cause for the profitability plunge. By Margarita Flores, Research Lead European Power, LSEG and Nathalie Gerl, Research Lead European Power, LSEG.
Negative power prices occurred in Spain for the very first time in April 2024 – until then, there was an informal price floor set at zero.
Early in 2025 a more than doubling in the number of hours of negative prices was already evident, and had reached 564 hours by November 2025.
Even though this figure is a high negative price ratio compared to other countries, Spanish prices do not actually get as deeply negative as in other countries – where minus €1/MWh is frequently encountered in Spain, in countries like Germany or the Netherlands prices can often be seen at minus €20/MWh.
Figure 1 shows a detailed tracking of Spanish negative pricing.
Figure 2 shows how Spain's negative hours tend to concentrate in the solar-intense hours, mainly between April and June.
Figure 3 shows capture rates. This reflects how between 8am and 5pm, which is when most of the solar production occurs, the average hourly prices are lower than the average daily price throughout the year.
This is a remarkable change influenced by renewables penetration. This used to be the other way around before the deployment of renewables became so widespread. Peak load power was previously observed to be consistently higher on weekdays between 8am and 8pm than for the entire day because power consumption is naturally higher in those hours.
Cannibalisation evolved rapidly, as capture rates for solar reached an all-time low of 12% in May 2025. The capture rates for Spanish solar are expected to keep decreasing in 2026, especially from March to June.
The renewables environment has proven to be more favourable for wind than for solar, simply because wind assets can capture even more value in the non-solar hours when prices are more supported.
In the long term we expect a rather sideways development for average Spanish prices and the same for wind capture prices.
Impact of the blackout
We do not attribute a very strong impact of the April 28 blackout on the wholesale market, but power prices in H2 2025 have turned out to be lower than in the previous year.
In the aftermath of the blackout the transmission system operator ran in safe mode, which means it raised the sources of inertia by curtailing solar and wind power and raising gas-fired production in Spain.
This adjustment was done after the day-ahead market cleared, through “technical restrictions” criteria so it wouldn’t impact the revenues for solar producers from the day-ahead market.
However, this did increase revenues for gas producers which would not otherwise have generated power. We observed that these interventions by transmission system operators were phased out after a couple of weeks.
Consumption in the summer of 2025 was much higher than in the previous year, driving more demand for all sources of electricity, hence lowering the need for grid safety-driven curtailment.
In general, what could be considered a positive outcome is that despite some pushback against interconnections, the EIB announced its support to Biscay Gulf IC after the blackout occurred. Biscay Gulf IC is the largest interconnector in the pipeline between Spain and France.
It is worth noting that the blackout did not slow down the enhancements in the interconnectivity out of “contagion fear” of grid instabilities.
This is particularly important for the Iberia peninsula of Spain and Portugal as the region is practically an island market when it comes to energy, with a high share of oversupply situations.
Enabling Iberian exports to the rest of Europe is key to harvesting the region’s high renewable potential and supporting renewable revenues while meeting growing demand in continental markets like France, Switzerland and other European countries.
Iberia post-blackout
The blackout is not expected to directly change the profitability landscape specifically for co-located assets.
Reduction of curtailment is among the main benefits of co-location. In Figure 4 the estimated curtailment of wind and solar in Spain in the last three years can be seen. This is derived from the difference between potential and actual generation.
It can be seen that it is somewhat seasonal and does not show a clear trend. However, without storage deployment or grid enforcement, curtailment would continue growing fast.
For 2025 we estimate that 5% of solar and 11% of wind generation has been curtailed.
Renewable assets with co-located BESS have the advantage of capturing higher prices and avoiding curtailment by the TSO in periods of oversupply or congestion in the system.
One example of solar plus BESS co-location is shown in Figure 5, which is the 494MW Mula solar plant in the Murcia region, with an assumed co-located BESS. The plant is owned by China Three Gorges Corporation.
Co-location is not necessarily more profitable than a simple standalone BESS investment but as grids are becoming increasingly congested, the location of the BESS or of the co-located assets can matter.
Another factor that favours co-location is that grid access queues are currently oversubscribed. If a co-located battery is faster to connect, time saved for approval of any required permits could also help the project’s and developer’s business case.
Solar profitability outlook
For the Spanish solar capture rates what will matter is how fast the storage capacity develops.
Power consumption is forecast to grow at a rapid pace and it is expected that it will be more concentrated in the solar-heavy hours, for which the right incentive mechanisms and policies need to be set.
Our forecast for the next couple of years is still trending downwards for Spanish solar capture rates, which can be seen in Figure 6 in green.
The decline forecast is stronger than for other continental markets which either still have relatively small shares of solar capacity, like Italy, or where the market is generally more dominated by wind power cannibalisation like in the UK not shown in Figure 6.
As we do not focus on investment costs as much as we do on revenues, we cannot give a detailed outlook on the profitability of BESS co-location with solar.
Investment outlook post-blackout
On the one hand, the Iberian April 28 blackout incident might lead to less appetite for renewable investment as it stirred up a debate about “too much” non-synchronous renewables putting grid inertia at risk.
On the other hand, the blackout served as a costly but effective wake-up call as it has led to new legislation with stricter frequency regulation rules, a time limit to grid access for new power demand and storage, and it has brought forward rules for faster wind repowering.
The Spanish government has also become more willing to let renewables provide ancillary services in the aftermath of the blackout. Of course, any new legislation on paper still needs to show its effects in practice.
One key concern is the uncertainty around consumption growth in Spain, which is necessary to make any future business case.
European power prices outlook for 2026
The key price setter is and is set to remain the price of gas, which has dropped quite sharply this year to half of what it was in February 2025.
The forward curve and our fundamental outlook for gas remains quite low for the coming year. That is why in most European markets we expect prices in 2026 to, on average, be lower than they have been in 2025.
The continued growth of renewables is the second factor driving prices down and causing more and more price valleys.
We have solid growth expectations for power consumption in the next year but we expect renewable generation growth to counterbalance that.
For Spain we expect this year to turn out an average power price of around €66/MWh, while for 2026 we forecast a drop to €61/MWh.
The impact of data centres
Several demand sectors have much higher relevance than data centres when it comes to power demand in Spain and we expect demand to grow by 2.5% per year within 2025–2030.
Sectors which will increase demand in the country are expected to be the electrification of transport and heating as well as demand for renewable hydrogen production, all of which are forecast to have a heavier weight on power supply than data centre growth.
We also expect substantial demand from new industries, including giga factories that plan to be established in Spain in the long term.
One important pull factor to attract demand is that we expect Iberia to have on average 20% lower wholesale prices than the average for Europe. The key challenge accompanying these growth expectations in the Spanish market is grid connection: in September 2025 it was stated that 83.4% of the nodes in the distribution grid are already saturated and will not be able to take in new demand under current conditions.
Outside of Iberia, we do expect a significant increase of 45TWh in power demand for data centres in Europe by 2030. That will impact Europe broadly but more specifically the places which have already emerged as key European hubs, including Ireland, the UK, France, Germany and the Netherlands. Nordic countries are expected to attract further installations and to increase demand in the coming years.
