One of the many famous quotes attributed to the famous investor Warren Buffet is the one that states that “only when the tide goes out will you know who was swimming naked.”
As usual, reality has once again proven Buffet right and after ending the years of euphoria in the energy sector and especially in the photovoltaic sector, the embarrassments of many of the companies that were the protagonists of that boom are emerging.
In the informative focus are the employment regulation files and the financial problems of Holaluz or SolarProfit and the corporate governance of EiDF, for example. But they are not the only ones who have been caught on the wrong foot by the sudden change in the energy market and the collapse in prices. They are only the most media ones. “There are many companies that are having problems, and not only those related to self-consumption, many marketers are also having problems. In general, all those who did not know how to do a correct analysis of market trends,” says Javier Revuelta, senior director of the energy consulting firm AFRY Management Consulting.
Each one has its own way of the cross, but they all start from a common failure. They trusted that the escalation in energy prices that erupted after the crisis of the war in Ukraine and the increase in demand for renewable energies were a structural change and projected constant growth in demand and high electricity prices, when what there was was just a response to geopolitical tensions. “This caused some companies to oversize their structures far beyond what was necessary and apply business models that the fall in prices has shown to be unsuccessful,” point out all the experts consulted.
Bulky staff, entire companies of photovoltaic panel installers or training companies were bought up due to the shortage of personnel. There is no shortage of those who point to marketing excesses and sumptuous offices, and even IPOs that led to very accelerated growth. Added to this were dubious commercial practices that were sanctioned by the competition regulator (CNMC). They were upstart companies in the energy sector that saw it as an easy way to make money.
“Beyond the undoubted excesses, which there are, there have also been a host of external macroeconomic episodes that rarely coincide at the same historical moment,” says Héctor de Lama, technical director of the renewable energy employers’ association, Unef. He refers to the historic rise in interest rates, which has caused families’ available money to drop dramatically; the fall in electricity prices from maximums of over 200 euros MWh in 2022 to the current negative prices at certain times and the incentive of subsidies from European recovery funds, which promoted self-consumption. And they sank it when they ran out.
But it’s not just demand that suffers. Also the financial structures of many companies, both self-consumption and energy marketing companies. “Many had contracts with clients linked to term energy purchase plans and whose amount was not even enough to pay the initial cost of the solar panels. When the price of electricity in the market was 300 euros MWh and they had purchased it for 100, they could resell it to their end customers cheaper than the market. Now, with zero and negative prices, balancing these differences is only possible for those who have a lot of financial freedom,” says Javier Revuelta.
The bleeding for marketers began in 2022, due to high prices, but low prices do as much or more damage. Self-consumption for private installations has a complicated journey, installers rely on the demand of companies and industries and the boost to collective consumption of the European Union to overcome the slump.
