‘Spain’s regulatory landscape still incomplete’: Nuveen on bankability in Southern Europe

Rodriguez de Rivera is also speaking today on the ‘How Solar & Storage Valuations Are Responding to Market Pressures?’ panel at the Solar Finance and Investment Europe (SFIE) event, also Solar Media-run.

Energy-Storage.news: How would you characterise the current state of the European energy storage market, in terms of the key trends, major successes and achievements, and challenges still to be overcome?

Isabel Rodriguez de Rivera: In recent years, Europe has experienced substantial growth in the deployment of BESS, despite a moderate slowdown in market expansion in 2024. The European Union has taken significant steps to integrate energy storage into its electricity market framework through the Clean Energy Package. Nevertheless, challenges remain.

Same question, but for specific national markets you are observing?

Italy: Benefits from public support regimes is the base revenue stream, like the Capacity Market or the Electric Storage Capacity Procurement Mechanism (MACSE), which called for significant appetite from producers resulting in an extremely competitive auction.

In Italy, one of the main obstacles is the slow and complex permitting process, paired with the fragmentation of responsibilities among local, regional and national authorities. Bankability in these projects heavily relies on revenue streams as well as warranty coverage.

Spain: One of the main barriers is the absence of a comprehensive regulatory framework. Despite progress in recent years the regulatory landscape remains incomplete. There is no remunerated market for the flexibility services these assets can provide, and administrative procedures remain complex.

Capacity markets, which will be designed to allow commercial-scale batteries to participate, are currently being developed in Spain. These markets were expected to be implemented in late 2025, or early 2026 but there has not been strong signalling yet.

The bankability of BESS projects in Spain – similar to those in Italy – depends on several key factors that lenders and investors use to assess risk and project viability.

How is the financing of BESS projects evolving?

Banks are evolving in their understanding on more complex revenue streams for BESS, which are fundamental for bankability as well as the interrelation on various revenue streams in hybrid assets. A key focus is placed on ensuring bankability with:

• Enough hedging revenue streams
• Regulatory and market frameworks – to participate in capacity and ancillary service mechanisms as well as centralised and local grid service tenders
• Appropriate warranty coverage
• Grid certainty
• Project sponsors’ strength

Closely related to that is how projects are monetised: how is the balance between merchant and tolling/fixed revenue schemes changing?

This varies depending on the set up of the promotor as well as risk appetite, typically a good balance of contracted revenues and merchant is preferred to ensure bankability and secured long-term revenues and provide certain enhancement of equity returns.

Grid and long interconnection backlogs are commonly cited as a major challenge: what measures do you see being taken to alleviate this, and how would you assess/estimate their impact?

Investment in grids! Generally across Europe.

See other Q&A pieces with event speakers published in this series below:

• Danske Commodities 
• Noveria Energy
• Green Flexibility
• Kona Energy
• Triple Point