Factors enabling concentrated solar power deployment in Spain

This is an extract from a recent report “Renewable energy benefits: Leveraging local capacity for concentrated solar power” by IRENA.

Spain’s robust CSP deployment was initially propelled by a suite of supportive policies, including feed-in tariffs (FiTs), investment subsidies, and dedicated research and development (R&D) programmes. These initiatives were complemented by Spain’s favourable climatic conditions and vast expanses of available land, which were instrumental in the industry’s success. The vigorous growth of Spain’s CSP sector can be attributed to several foundational factors: resource endowment, supportive policies and other economic and industrial factors, and technology development.

Resource endowment

Spain has the highest solar irradiation in the European Union. Annual global horizontal irradiance and annual DNI range from 1750 to 1850 kilowatt hours per square metre (kWh/m2) and 1900 to 2000 kWh/m2, respectively, in the south and middle, while they are in the range of 1 600 kWh/m2 and 1 800 kWh/m2 , respectively, in the north. The figures are substantially higher than for most other European countries. The southern expanse of Spain is among Europe’s most solar resource–rich regions. Annual DNI levels exceed 2000 kWh/m2 here. Additionally, the low population density and the presence of large tracts of flat territory have made it an ideal location for CSP development.

Supportive policies and other economic and industrial factors

Spain’s energy sector has undergone significant transformation to reduce the country’s overall reliance on fossil fuels. Energy security, cost-effectiveness and environmental sustainability goals have led to a shift in Spain’s energy policy, shaped by EU directives for cutting greenhouse gas emissions and strengthening the consumption of renewable energy. The introduction of the FiT system, one of the earliest in Europe, substantially boosted CSP capacity. A series of legislative acts, including Royal Decrees 28128/1998, 841/2002 and 436/2004, provided essential financial support. They established a framework of regulated tariffs and premium payments over and above the revenue from electricity sales. A conducive environment for investment was thus created. Notably, Royal Decree 436/2004 stipulated fixed tariffs for CSP producers, calculated as a percentage of the average electricity tariff, and increasing the appeal of CSP ventures. This decree was instrumental in fostering the development of the initial 200 MW of solar thermal electricity in Spain. Competitive tariffs were offered for the first 25 years of operation.

Projects such as PS10, Andasol I and Gemasolar emerged, their realisation bolstered by additional support from entities such as the European Commission. Further improvements under Royal Decree 661/2006 were crucial in promoting CSP investments. This decree set forth new tariffs and premiums for various facilities, including renewable energy, waste-to-energy and hybrid systems, within a specialised regulatory framework. CSP installations benefited greatly from this policy, which established technology and capacity-specific limits and offered bonuses for high system efficiency or reactive energy use. This confluence of supportive factors unleashed a wave of development, propelling the CSP sector to flourish beyond expectations. CSP projects had cumulatively reached nearly 2.3 GW of capacity, which was substantially higher than the initial 1 GW target the government had set in its renewable energy plans

Technology development

Spain’s legacy in CSP innovation is deeply rooted in the establishment of the Plataforma Solar de Almería (PSA), a beacon of knowledge and technological advancement in CSP technologies since the late 1970s. Collaboration among PSA, Spanish universities and the broader European industry has catalysed a robust scientific and technological milieu, which is optimally positioned to leverage regulatory frameworks for stimulating renewable energy sectors, CSP included. Spain’s cumulative installed capacity of over 2.3 GW as of 2023 represents 33% of the global total.

From a technological standpoint, PT systems have predominantly been selected for CSP development in Spain – a trend strongly influenced by the established success of the solar energy–generating systems in California. The preference for PT systems, which was rooted in the banking sector’s familiarity with this specific technology, was reflected by Spain’s choice of this technology, especially for projects developed under FiTs. Given that the only commercially operated CSP technologies at that time were PT systems, Spanish banks were more inclined to finance these over other technologies such as tower systems or Fresnel reflectors. This comfort with proven operational efficiency facilitated financing and promoted the swift deployment of the PT technology. In parallel, Spanish CSP installations have propelled the technology forward by integrating TES systems, significantly improving energy management.

Status and perspectives

Despite rapid growth and technological progress in the sector, the 2008 global economic downturn and an expanding tariff deficit – partly attributed to the rise of renewable energy subsidies under the “special regime” after 2006 due to rapid growth of CSP and PV capacity, led to a rollback of numerous renewable energy incentives in Spain. This roll-back included the withdrawal of Royal Decree 436/2004 in 2012, supplanted by a complementary payment regime following a moratorium on renewable energy instituted that same year. The shift from a previously guaranteed profitability of 7.5% to a range of 4%-5% in January 2020 induced policy uncertainties; this in turn triggered a fiscal strain on CSP projects, and impeded further expansion within the industry.

Substantial capital investment requirements for CSP projects remain a significant barrier to their advancement in Spain, especially in the absence of subsidies. While the global capital costs for CSP projects are on a decline, the LCOE for CSP continues to be higher than that for other renewable energy sources. The benefits of CSP, such as its dispatchability and substantial local content, are not yet adequately compensated for by the prevailing electricity market structures. However, progress in techno-economic aspects has the potential to decrease capital costs substantially and improve economic viability, in turn positioning CSP as a more competitive player in the renewable energy arena. Also, revisions to electricity market regulations to appropriately value dispatchability, along with support to local employment and recognition of high local content through national or regional incentives in Spain, could greatly encourage the country’s commercial CSP sector and expedite the establishment of commercial CSP plants

Despite the challenges mentioned earlier, Spanish firms remain influential in CSP projects globally, underscoring Spain’s substantial contribution to the industry. The ongoing evolution of technology and economic conditions will continue to influence the trajectory of the CSP industry both within and beyond Spain’s borders. In September 2024, Spain updated its National Energy and Climate Plan (NECP) for 2021–2030 (Ministry for Ecological Transition and the Demographic Challenge, 2024). The revised NECP underscores the growing importance of CSP and CST technologies in advancing the country’s decarbonisation efforts.

By 2030, the operational installed CSP capacity is anticipated to reach 4.8 GW, more than doubling the current capacity. Furthermore, CSP plants are projected to contribute 3% of the total electricity generation mix by the same year, up from the current 2%. This growth reaffirms the strategic role of CSP technologies in Spain’s energy transition.

In addition, a carbon-neutral energy system requires developing CST systems to deliver industrial heat to cover over 30% of the energy demand in the industrial sector. Some Solar Heat for Industrial Processes systems have been used in the agri-food sector for the decarbonisation of processes such as pasteurisation, drying, sterilisation, cooking, steam production, distillation and biochemistry, among many others. To promote an understanding of this application, the Institute for Energy Diversification and Saving launched a technological guide containing information and documentation available on the systems’ performance and costs, and presenting successful cases implemented in the European market.

For these reasons, CSP should be recognised as a contributor to meeting energy needs, creating new opportunities for the European industry and supporting Spain’s decarbonisation agenda. SWOT analysis shows that, despite its significant strengths and opportunities, the Spanish CSP sector has weaknesses and faces threats, some of which are specific to the country’s political and regulatory context and could be overcome with appropriate support from the Spanish administration.