Natalia Luna (Columbia Threadneedle Investments) | Last Monday, Spain and Portugal suffered a major power outage that left both countries without electricity for around 12 hours. The blackout affected public transport, network services and hospitals, although some critical services were fortunately able to withstand the outage thanks to emergency generators.
According to my research, this appears to be the worst blackout on record in Europe. Nationwide blackouts of this kind are highly unusual in any Western country.
Investment position:
The blackout on 28 April illustrates the importance of grid stability for energy security. As renewable energies, which have a large share in Spain’s energy mix, penetrate grids across Europe and the world, the risk of grid instability increases. Therefore, such incidents could become more frequent in the future.
In the wake of the blackout, countries, especially those in the European Union, are likely to focus more on their energy networks and systems, with spending in these areas likely to increase. This supports our investment thesis in network infrastructure driven by the increased adoption of renewable energy and the need for countries to modernise and upgrade infrastructure, which is facing increasing challenges due to:
- Greater overall demand pressure on electricity (generation and related infrastructure) driven by the electrification of the economy, reindustrialisation/reshoring, and the growth of AI data centres.
- Greater incorporation of renewables into the grid, which have a higher risk of intermittency.
- Increased intensity and frequency of extreme weather events.
The blackout in Spain also reinforces the case for investment in electricity storage and backup generators, as well as supporting the case for investment in nuclear. Nuclear is a reliable source of energy that provides grid stability, energy security and can be used to meet the growing demand from AI data centres.
Background:
- Redeia, the national electricity grid operator, has confirmed that the blackout was not caused by a cyberattack.
- Investigations, which are still ongoing, indicate that the cause was a movement in the grid frequency, which caused sudden changes in power on the grid, known as ‘oscillations’, which can trigger chain reactions and lead to a grid-wide failure.
- Spain generates 80% of its electricity from renewable sources. The country has little storage capacity to help balance the grid by storing excess energy, and Spain lacks interconnection lines with other EU grids that could also help compensate for incidents such as these by connecting to them.
