​Spain and Portugal – vying to become Europe’s energy powerhouse

The solar energy sector in Spain has been strong for many years and the country currently has the largest solar pipeline in Europe. It is expected to install 4 GW of solar capacity this year alone.

An ongoing court case in London, however, could have widespread ramifications for clean energy financing in the country, as well as across the EU.

The case concerns a decade-long dispute by renewable energy investors who poured millions into a solar plant in southern Spain in 2011. The Spanish government offered subsidies to encourage the development of renewable energy only to slash the payments back in 2013 to cut down public spending.

Court rulings

According to reports, Spain has been sued internationally more than 50 times over the retroactive changes, with more than 20 of the cases favouring the investors. So far, Spain has refused to pay any outstanding amounts from those cases – something investors will certainly take into consideration when deciding on future project destinations.

Currently, however, solar plant projects continue to be a source of domestic project cargo activity, according to Jimmy Jaber Bringas, ceo of Bilbao-based project logistics specialist Sparber Group. His company has also been involved in handling cargoes for car manufacturing plants, including heavy machinery, transformers and presses.

With the National Integrated Energy & Climate Plan, Spain aims to source 74 percent of its power from renewables by 2030. The acceleration of solar PV installations will play an important role in that, with the potential to make up more than half the region’s renewable energy by 2030.

Between 2022-2025, the country should see 19 GW of new capacity come online, according to a report from industry group SolarPower Europe. Research from Rystad Energy, meanwhile, showed that there were over 100 GW of projects with grid approval in October 2022 and a further 23 GW awaiting permission.

Renewable energy development on the Iberian Peninsula will get a boost in the coming years. Currently, it has more than 50 GW of installed renewable energy capacity – 60 percent coming from onshore wind – and it has ambitious plans to increase the share of renewables in the power mix from 48 percent in 2021 to 64 percent in 2025 and 79 percent in 2030, putting the region at the forefront of the European energy transition.

Offshore wind

In Portugal, offshore wind will lead the way. The government announced last year that it will boost the country’s offshore wind target from 6 GW to 10 GW by 2030. The country is also on track to host the world’s first subsidy-free commercial scale floating offshore wind project following BayWa’s permit application for a 600 MW development off the Portuguese coast.

The abundant sunshine along with strong winds and mature gas infrastructure means the Iberian Peninsula is well positioned to compete with – or even replace – Northern Europe’s existing energy industrial hub, according Rystad Energy. It said: “With reliable gas supply from North Africa, lower power prices compared with the rest of Europe, and a renewable energy pipeline that stands out on the continent, Spain and Portugal have the potential to evolve into a new European energy powerhouse.”

According to Spain-headquartered Erhardt Projects, however, “the national market can be hampered by economic uncertainty and a lack of legal certainty.” Nevertheless, a spokesperson for the company was optimistic about the prospects for project cargo handling: “Spanish companies, production and logistics services providers are working in an international market that will surely help to mitigate the worst omens for the domestic market.”

Driving demand

Despite the difficulties facing the project cargo supply chain all over the world, the energy transition, investments in industry and public works are driving demand for a considerable number of projects. The Spanish market, in particular, is prepared to support those developments with a strong cluster of project logistics specialists, manufacturers and heavy lift-capable ports based there.

Terminales Marítimos de Galicia (TMGA) is a stevedore based in the ports of A Coruña and Ferrol. It saw positive development of its project cargo handling during 2022, with double-digit growth in Spain driven by the export of capital goods through both ports. This year has also started strongly and the company is confident that it will maintain the current growth trend, despite fears of a slowdown in the second half.

“It is the energy industries that are pulling hard,” said a spokesperson for TMGA. “Offshore and onshore wind power, solar photovoltaics, as well as capital goods for automotive and mining industries.” The typical destinations for these cargoes from Spain include the Middle East, Australia, the USA and some countries in South America. European destinations are “booming” too, mainly for current offshore wind energy and LNG projects, and foreseeable green hydrogen developments.

Bringas echoed this outlook. His company has been involved in the export of machinery to Africa, the Middle East and some South American countries – primarily wind turbines, solar plants, machinery and components for thermoelectric plants.

These types of development were described by Erhardt Projects, as “‘country projects’ – large infrastructures on which the future development of a country will be sustained”. As such, the company believes that project cargo activity has not yet been affected by the broader slowdown in consumer spending, given the importance of those types of projects and that they operate in sectors that require “a high dose of investment capacity.” The company noted that geopolitics continues to be a challenge that can reconfigure commercial relations in the future, however.

The spokesperson at Erhardt Projects also said that energy infrastructure stands out, with renewables, oil and gas and nuclear projects ongoing around the world, in addition to other projects such as public roads and bridges and petrochemical plants.

“Renewable energy projects are destined for developed regions (Europe, North America, etc). Public infrastructure projects are more focused on developing regions, and petrochemicals in the UAE and Saudi Arabia, who are investing in their traditional fossil industry,” the company explained. “The forecast for the first half of 2023 continues to be very positive. Making estimates for more distant horizons would be risky on our part, considering geopolitical and economic variables and uncertainties, such as high interest rates, inflation, fuel prices or the evolution of freight rates.”

These issues are not exclusive to Spain, Bringas noted. “Different countries in the world where we handled projects had the same problems, some cases even worse than Spain. We believe – or hope – that at some stage of 2023 this will stop. This situation is causing extremely high costs for the whole project.”

He noted that some companies have had great difficulties facing the increasing costs, with some withdrawing their project cargo services.

While some suffered, those who were able to weather the storm have been able to prosper. Sparber, for instance, has increased its turnover on the project side of its business, “discovering African markets where we can handle huge projects, as well as handling projects in European countries”.

“Remarkable year”

It was also a “remarkable year” for Erhardt Projects. “We have taken partnerships with our customers to a new level, strengthening their end-to-end supply chains in highly disruptive times. It turned out to be a year of consolidation for the brand in the Spanish and European markets, and a leap towards international markets, mainly in the Middle East and North America.”

For example, Erhardt Projects launched operations in Abu Dhabi in the UAE during 2022 and this year will open in Saudi Arabia. “We want to be present in one of the regions with the highest investment in sectors such as oil and gas, refineries, renewables and civil infrastructure, and with the highest growth expectations worldwide.”

Along with the expansion, Erhardt Projects has increased its staff and areas of specialisation, the spokesperson said. “The people who work at Erhardt Projects are the key to our transformation and we are preparing ourselves for a new generation of executives who will be in charge of driving the company’s growth in the medium term.

“We must not forget that we are facing a new energy frontier, which is committed to clean energy or decarbonisation in production processes. There are many ‘country’ projects and business initiatives in this sense and that has a positive impact on the demand for project cargo logistics services.”

While Erhardt Projects was positive about the prospects of domestic project cargo handling activity, the spokesperson noted that the lack of investment in large infrastructure projects in Spain is accelerating the internationalisation of Spanish manufacturers, EPCs and freight forwarders that specialise in projects, “in order to be close to energy benchmarks and their decision centres… and thus to be able to access the large turnkey projects planned between 2022-2025”.

“This phenomenon,” the spokesperson continued “is attracting Spanish companies (manufacturers, engineering and clients) from the driving sectors of the Spanish economy (renewables, infrastructure and transport) that generate project cargo opportunities.”

In a similar vein, TMGA said that the “great concern of the port sector is the revitalisation of the industry that surrounds the Spanish ports. Without industry, there are no ports. We are concerned about the proper development of the industry in our area of influence.”

Other issues include the rising operating costs as a result of energy price hikes and environmental regulations that will require investment in the near future. “Within the European recovery plans, Next Generation public funds represent an opportunity to modernise the port sector although, for the moment, they are not reaching our sector,” TMGA said.

Nevertheless, the spokesperson continued: “At TMGA we continue to bet on the development of our activity in the ports of A Coruña and Ferrol. In A Coruña, in the outer port of Punta Langosteira, we are developing a plan that has resulted in more than EUR25 million (USD25.4 million) of investments aimed at the construction of new warehouses, equipment expansion with high-capacity mobile cranes and the development of a horizontal transport circuit (in this case for agrifood cargo).”

Bullish outlook

Overall, Erhardt Projects is bullish about the year ahead. “The project cargo industry is no stranger to market instability. In addition to the crisis caused by the pandemic, maritime congestion and the lack of ships on the market, inflation, the rise in energy prices, the climate crisis and a war in Ukraine were added.

“Some of these factors, such as the energy crisis and the drive to decarbonise the planet, are accelerating investments in the energy industry, especially renewable energies, which translates into an increase in the project cargo contracts.

“After an intense 2022, with a high demand for services in the project cargo sector, 2023 started with the same intensity, with growing productive activity at a global level that will materialise in a good first semester of activity.

“Recession forecasts continue for some time in 2023 but, to date, the reality is that new projects continue to be contracted that augur a prosperous year for our sector, although surely with potholes and uncertainties along the way.”

This article has been taken from HLPFI’s May/June2023 edition.