Solar developers look for the exit as falling power prices squeeze returns

Solar power developers in Spain are increasingly seeking to exit projects as a sharp fall in electricity prices erodes returns and exposes the risks of rapid expansion in one of Europe’s largest renewable energy markets.

Years of favourable policy support, abundant sunshine and access to sparsely populated rural land have helped Spain become a solar powerhouse. However, a surge in generation capacity has begun to outstrip demand, leaving power producers grappling with weaker pricing and declining asset values.

The challenges in Spain are being closely watched elsewhere in Europe, including in the UK, where the government has set an ambitious target of expanding solar capacity to between 45GW and 47GW by 2030 as part of its net zero strategy.

In Spain, developers attempting to sell solar plants are finding that valuations have fallen sharply, making it harder to attract foreign investors without restructuring portfolios. Some sellers are stripping out weaker assets to salvage deals on higher-quality projects.

Carmen Izquierdo, co-founder of renewable energy deal platform nTeaser, described the current environment as “discount season” for solar assets. “Spain remains a dynamic market, but there is greater scrutiny of assets,” she said. “They are willing to sacrifice part of the portfolio to move the rest forward.”

According to consultancy Alvarez & Marsal, valuations of early-stage solar projects, particularly those that are ready to build, dropped by more than 60 per cent between 2021 and 2023, falling to between €50,000 and €90,000 per megawatt. The firm warned that an excess of installed capacity, weaker-than-expected demand and a steady erosion of power prices were calling into question the profitability of many renewable projects.

The pressure has been compounded by a growing number of hours when wholesale electricity prices fall below zero. Over the first nine months of this year, the number of sub-zero pricing hours nearly doubled compared with the same period last year, reflecting the difficulty of absorbing peak solar output during periods of low demand.

Renewables now account for roughly 57 per cent of Spain’s electricity generation, following a strong push by Prime Minister Pedro Sánchez to accelerate the energy transition. That strategy came under political scrutiny earlier this year after a major power outage, the most severe in Europe for two decades, prompted critics to question the country’s reliance on renewables. Both the government and Red Eléctrica have denied any link between the blackout and renewable generation.

With returns under pressure, some developers are exploring ways to adapt rather than exit entirely. Investment in battery storage is increasingly seen as a way to smooth revenues by storing power during periods of low prices and selling it when demand rises. Others are turning to overseas buyers willing to take a longer-term view.

The Spanish utility Endesa has completed several high-profile disposals, selling major stakes in two solar portfolios to Masdar, the Abu Dhabi state-owned renewable energy group. The transactions, completed over the past year, were valued at roughly €1 billion combined.

Market data underlines the shift in sentiment. Figures from nTeaser show that the average value of operational solar plants has fallen from €916,000 to €648,000 per megawatt since the start of last year, reflecting a cooling market after years of rapid growth.

For policymakers across Europe, Spain’s experience is emerging as a cautionary tale: rapid deployment of renewable capacity must be matched with grid investment, storage and demand-side reforms, or risk undermining the economics of the very projects designed to accelerate the transition to clean energy.