One of the many famous phrases attributed to the famous investor Warren Buffet is the one that assures that “only when the tide goes out do you know who was swimming naked”.
As is usually the case, reality has proven Buffett right again and after the years of euphoria in the energy sector and especially in photovoltaics, the shame of many of the companies that are the protagonists of this boom are emerging .
In the news focus are the employment regulation files and the financial problems of Holaluz or SolarProfit and those of corporate governance of EiDF, for example. But they are not the only ones affected by the sudden change in the energy market and the drop in prices. They are only the most media. “There are many companies that are having problems and not only those related to self-consumption; many marketing companies also have problems. In general, all those who did not know how to make a correct analysis of market trends”, says Javier Revuelta, senior director of the specialist energy consultancy AFRY Management Consultoria.
Each one has its own viacrucis, but they all start from a common error. They trusted that the energy price spike that erupted after the Ukraine war crisis and increased demand for renewable energy was a structural change and projected steady growth in demand and high electricity prices when what was there was only a response to geopolitical tensions. “This caused some companies to oversize their structures far beyond what was necessary and to apply business models that the drop in prices has shown to be failures”, affirm all the experts consulted.
Voluminous templates, entire companies of photovoltaic panel installers or training companies were purchased in view of the shortage of personnel. There is no shortage of people 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 came to be sanctioned by the competition regulator (CNMC). They were outsiders to the energy sector who saw it as an easy way to make money.
“Beyond the undoubted excesses, which there are, there has also been a cluster of external macroeconomic episodes that hardly usually coincide at the same historical moment”, indicates Héctor de Lama, technical director of the employer’s renewable energies, UNEF. It refers to the historic escalation of interest rates, which has caused families’ available money to drop precipitously; the drop in electricity prices from peaks above 200 euros MWh in 2022 to the current negative prices at some specific moments, and the incentive of subsidies from European recovery funds, which boosted self-consumption. And they sunk it when they sold out.
But it’s not just the demand that suffers. Also the financial structures of many self-consumption companies as well as energy trading companies. “Many had contracts with customers tied to term energy purchase plans and their amount was not even enough to pay the initial cost of the solar panels. When the price of light on the market was 300 euros MWh and they had bought it at 100, they could resell it to their end customers cheaper than the market. Now, with zero and negative prices, squaring these differences is only possible for those who have a lot of financial lung”, says Javier Revuelta.
The indentation for marketers started in 2022, because of high prices, but low prices hurt as much or more. Self-consumption for private installations has a complicated journey, installers rely on demand from companies and industries and the European Union’s collective consumption drive to overcome the shortfall.
