Energy shift potentially spearheaded by Iberian Peninsula
Portugal and Spain are spearheading the European green hydrogen market, driven by ambitious energy policies focusing on renewable energy expansion, green hydrogen development, and strengthening cross-border interconnections within the European energy market. However, they face significant challenges related to grid capacity, bureaucratic hurdles, and insufficient interconnection infrastructure.
Energy Policies and Green Hydrogen Market Position
Spain's clean energy transition is underpinned by the EU Green Deal and its National Energy and Climate Plan (NECP), targeting 74% renewable electricity by 2030. The government encourages green hydrogen through national frameworks, with major investments by companies like Iberdrola and Naturgy. Market incentives, feed-in tariffs, and auctions stimulate renewable generation and green hydrogen projects.
Portugal's energy policy aligns closely with Spain's goals, emphasizing electrification, green hydrogen, and leveraging abundant solar, wind, and hydro resources. Both countries aim to capitalize on their natural renewable energy advantages and technical capacity to become leaders in European green hydrogen production and industrialization.
Strengthening of Cross-Border Interconnections
The Iberian Peninsula currently has very low electricity interconnection capacity with the rest of the EU, around 3%. The blackout in April 2025 highlighted vulnerability linked to insufficient cross-border interconnections and grid limitations. Spain and Portugal have jointly called for increased links, targeting 15% interconnection capacity by 2030 to enhance system security, reliability, and integration into the European grid.
Interconnections are crucial for market integration and supply security, but challenges include technical complexity, regulatory coordination between countries, and managing systemic risks such as blackout propagation. The governments of Spain and Portugal actively seek stronger cooperation with France and the broader EU to develop a roadmap for interconnection expansion within 2025.
Challenges
Grid limitations and instability risks due to high shares of intermittent renewables without enough storage or flexible capacity remain a pressing issue. Bureaucratic delays and licensing hurdles continue to slow down renewable and hydrogen project deployment in both countries. The need for greater local community involvement and benefit-sharing in energy projects is recognized as vital for social acceptance and smoother implementation.
Existing interconnections to France and the rest of Europe are insufficient, impacting system resilience and market coupling. These challenges must be addressed to fully realize the opportunities presented by the green hydrogen market and the energy transition.
The study "After the Energy Crisis: Policy Responses in the Iberian Peninsula" was prepared by Gonzalo Escribano, Ignacio Urbasos, Ana Fontoura Gouveia, João Fachada, and was a partnership between the Francisco Manuel dos Santos Foundation (FFMS) and the American Brookings Institution. The study emphasizes that Portugal and Spain see the energy transition as an economic opportunity and suggests leveraging this political capital to accelerate inclusive decarbonization projects. The study, however, does not provide specific details about the timeline for the implementation of the ambitious energy targets set by Portugal and Spain, the current level of interconnections between the Iberian Peninsula and the rest of Europe, or the funding for the implementation of these targets.
- Portugal and Spain are not only peers in spearheading the European green hydrogen market, but they are also pursuing environmental-science and sustainable-living policies that focus on renewable energy expansion and green hydrogen development.
- In light of the EU Green Deal and its National Energy and Climate Plan (NECP), Spain aims to achieve 74% renewable electricity generation by 2030, with significant investments coming from companies like Iberdrola and Naturgy.
- Portugal, in sync with Spain's goals, emphasizes electrification and green hydrogen production, intending to capitalize on its ample solar, wind, and hydro resources for industrial growth.
- Spain and Portugal recognize the importance of cross-border interconnections and have set a target of 15% interconnection capacity with the European grid by 2030, aimed at enhancing system security, reliability, and market integration.
- The low current interconnection capacity (around 3%) between the Iberian Peninsula and the EU has been highlighted as a vulnerability, following the April 2025 blackout.
- Addressing the challenges related to technical complexity, regulatory coordination, and managing systemic risks is essential for interconnection expansion within 2025.
- Apart from grid limitations and bureaucratic hurdles, the need for greater local community involvement and benefit-sharing in energy projects is considered crucial for social acceptance and smooth implementation.
- The study "After the Energy Crisis: Policy Responses in the Iberian Peninsula", prepared by the Francisco Manuel dos Santos Foundation (FFMS) and the American Brookings Institution, suggests that Portugal and Spain should leverage political capital to accelerate inclusive decarbonization projects, including learning from education-and-self-development opportunities in lifelong-learning.
- The study does not provide specific implementation timelines for the ambitious energy targets set by Portugal and Spain, nor details about the current interconnection level between the Iberian Peninsula and Europe, or the funding for implementing these targets.
- An increasingly popular sector within the energy industry, investing in finance, energy, fintech, home-and-garden, and smart-home-devices is thriving, aided by growing interests in data-and-cloud-computing and renewable-energy technologies.
- The lifestyle shifts towards sustainable living and commitment to tackling climate-change are gradually influencing business ventures, from real-estate development to environmental-science research, making Portuguese and Spanish partnerships a promising arena for future collaborations.
