Little by little, Spain seems to be weaning itself off its “addiction” to natural gas. Since 2022, coinciding with the Russian invasion of Ukraine, imports of this fossil fuel have been gradually and significantly reduced. Until June, purchases from abroad reached 176 terawatt hours (TWh), well below the almost 220 of a couple of years ago and also lower than the just over 200 of 2023according to data from the public operator EnagasIf the trend continues, and excluding 2020, when energy consumption plummeted worldwide as a result of the coronavirus, natural gas consumption in Spain would reach its lowest level in the last twenty years.
What has caused this significant drop in gas demand in Spain? Peter Cantuelan expert in the energy sector, points to a combination of three factors, two of a temporary nature and one of a structural nature.
Homes and industry
As for the current factors, Cantuel points out first of all that Gas consumption in Spanish homes during the last winter months was more moderate because “the temperatures were milder.”
To this, Cantuel also adds the fall in consumption in industrial sectors that consume this fuel due to a more stagnant economic situation. According to data from Industrial Gasan association that defends the interests of industrial gas consumers in Spain, Between January and May, gas consumption in industry amounted to 14.38 TWh, 16% below the average of recent years. Although in sectors such as refining it has exceeded the levels set in 2022 or 2023 – although without reaching the average for the 2018-2021 period – in most other businesses, such as paper, textiles, construction or agri-food, it does not even reach those recorded last year. And in others such as chemicals or steel, they are at very similar rates to those of 2023.
The expert also points out that the advancement of energiesrenewables “reduces dependence on gas,” a point on which he agrees with Eduardo Irastorza, professor at EAE Business School and expert in the energy sector.
Renewables covered 44% of electricity demand until June
The strong increase in installed energy capacity, especially solar and wind, has allowed these technologies to go from covering 26% of total Spanish electricity demand in 2019 to 44% in the first six months of this yearaccording to data collected in the report of the Bank of Spain «The impact of renewable energies on the wholesale price of electricity». These technologies, which have marginal costs much lower than fossil fuel-based generation sources – in particular, combined cycles, which mainly use natural gas as fuel – have been covering more and more hours of demand, which has not only led to a decline in gas consumption but also in electricity prices. According to the same report by the Bank of Spain, in the first half of the year the percentage of hours with the price of energy in the wholesale market at zero euros or negative reached 15%. In addition, and according to its calculations, in the first half of this year the price of electricity in the “pool” has been 40% lower than what would have been observed if wind and solar generation had remained at around 26% in 2019.
The reduction in energy prices, however, has put part of the energy industry on alert. The renewable sector believes that if the falls are one-off, temporary situations, they can be explained and form part of a transition process. But they add that, without a doubt, if they become a structural problem, they generate a series of disincentives for investment that can affect this path of energy transition.
Irastorza also points out that, in the advance of renewables, self-consumption installations are playing an increasingly important role. Spaniards, he says, are “filling their roofs with solar panels” in view of what has happened – and seems to be happening more frequently – in months like August, where temperatures have been very high and the sun has not stopped shining.
After the “boom” it experienced in 2022 after the pandemic, self-consumption lost some momentum in 2023. However, it continued to grow and, at the end of 2023, Spain already had 6,955 MW of accumulated power nationwideaccording to data from the Spanish Photovoltaic Union (Unef)the majority association for solar energy in the country. This year, the pace of installation fell by 26% in the first quarter. Something that Unef considers logical after the post-pandemic boom. “We are in a moment of stabilization of self-consumption in Spain. The loss of the perception of high energy prices by citizens, as well as the reduction of the purchasing power of families due to the increase in inflation, together with the exhaustion of the aid contemplated within the Recovery Funds motivate these data,” he said when publicly announcing the quarterly data José Donoso, director general of Unef.
In addition to these three factors, Irastorza adds another factor that, in his opinion, pushes Spain to reduce its gas consumption: its priceAs he explains, both the war in Ukraine, which has driven Europe to disengage as much as possible from Russian gas; and the strained relationship that Spain currently maintains with Algeria after its change of position regarding Western Sahara, have forced Spain to pull the trigger. Liquefied natural gas (LNG) from the United States to stock up. “And this gas is more expensive, because it costs more to produce and, in addition, it has to be brought by ship, which increases its price.”explains Irastorza. In 2021, the United States supplied Spain with 11% of its gas and Algeria with 40%, according to data collected in the country’s energy report published by the European Commission. However, although the North African country remains Spain’s main supplier, it has reduced the percentage to 34%, while the United States has increased it to 18.2%, according to the Enagás statistical bulletin.
Despite all the sanctions imposed by the war, Russia remains one of Spain’s major gas suppliers, with 22.8% of the total. A circumstance that does not surprise Irastorza. “Russian gas is much cheaper and is still purchased through third countries, such as China or India, to which Putin continues to sell,” he explains.
Cantuel adds that on this issue it is also necessary to take into account that Spanish companies have long-term contracts and are subject to penalties if they do not meet a minimum purchase requirement.