Spanish dams at 27-year low as European energy crisis widens

Spanish hydropower dams are on course to end the summer at their lowest level in three decades, putting more pressure on electricity costs as Europe’s energy crisis widens.

Hydro capacity stood at 36.9% in the week through August 23, the lowest since 1995, according to data published by the energy ministry. Reserves are also significantly below the 10-year median.

Water cascades through the Sau dam in Vilanova de Sau, Spain, on Saturday, Aug. 20, 2022. In the midst of an arid summer that set heat records across Europe, the continent’s rivers are evaporating.

The hit to hydropower, which accounts for about 16% of Spain’s generating capacity, comes as wind farms suffered below average breezes and solar production was curbed by Saharan storms and dry weather that coated large parts of the country in dust.

While the blows to renewable energy will force power generators to increase their reliance on gas at a time when Russia is squeezing flows to Europe, Spanish consumers won’t face the same price shocks as their counterparts in the UK and Germany. That’s because of the so-called Iberian exception that gives both Spain and Portugal a regulatory waiver allowing them to decouple the price of wholesale electricity from gas by capping the price of the fossil fuel.

Total hydro output dropped by 44% to 18,230 gigawatts-hour over the past year, according to data published Tuesday by Red Electrica Corp., Spain’s electricity transmission operator.

Still, the outlook for Spanish hydropower isn’t set to improve significantly over the coming months, according to a recent European Commission report.

“Although close to normal conditions are predicted from August to October 2022,” following the long dry period of recent months, “this may not be enough to fully recover from the deficit cumulated in more than half a year,” according to the report. “Severely drier than normal weather conditions are predicted only over western Spain, eastern Portugal, and along the Croatian coast.”

Major Spanish hydropower producers include Iberdrola SA, Endesa SA and Repsol SA.

© 2022 Bloomberg