Could a change of government in Spain have big implications on energy policy?

Spain's upcoming general election on November 29 could significantly impact the nation's energy policies, potentially benefiting and threatening utility companies, according to Goldman Sachs. The bank's October 6 report indicated that a government led by the center-right People's Party (PP) might adopt more market-oriented energy policies, promoting nuclear power, renewable energy, and data center development.

The center-right party is anticipated to be the largest parliamentary group following the early election in August 2027, as suggested by recent polls.

Goldman Sachs expects continued investment in electrification and renewable energy sources despite the election's outcome, driven by energy security priorities and favorable economics. Solar power, when combined with energy storage, appears more competitive than gas, costing around €60-70 per megawatt-hour. The report also noted that a change in government could ease restrictions requiring new data centers to utilize 80% renewable electricity, potentially benefiting Solaria, a firm specializing in solar energy.

Nuclear operators could also gain from the scenario, as the People's Party (PP) and Vox have previously advocated for extending the lifespan of existing reactors. According to Goldman Sachs, this could result in an additional €500 million to €750 million in annual EBITDA for Endesa and Iberdrola, depending on electricity prices.

However, the retail electricity margins could present a potential downside risk, with a 10%-20% reduction in margins potentially reducing annual pre-tax profits by €120 million to €240 million each for Endesa and Iberdrola. This would translate into estimated 2027 earnings-per-share reductions of about 7% for Endesa and 2% for Iberdrola.

The bank warned that a government transition could further delay hydrogen infrastructure investments, creating uncertainty for Enagas, a firm specializing in hydrogen. Goldman Sachs expects the overall impact on most Spanish utilities to be neutral to positive, though the exact effects will depend on the final party manifestos published.