Pain in Spain: Why infrastructure resilience has never been more important

Few events in modern history have revealed our dependence on electricity infrastructure as starkly as the Iberian power outage of 28 April. In the space of just five seconds, Spain lost somewhere between 15-25GW of electrical load, equivalent to 60-100% of national demand.

The videos and personal accounts that quickly emerged ranged from the worrying to the bizarre. Of course, traffic lights and electric trains no longer worked, but who thought of the bathroom sensors dispensing water and soap, the automatic door’s “magic eye” or, perhaps most critically of all, the growing list of mundane commands which rely on a Wi-Fi router?

“The event seems likely to reignite the debate around tolerance levels for renewables in the power mix.”

A detailed explanation of what went wrong is still emerging, but the event seems likely to reignite the debate around tolerance levels for renewables in the power mix and whether grid investment is keeping pace.

It bears repeating that, from the perspective of installed capacity, Spain is a stand-out renewables success story. The country is fifth globally for total installations of both wind and utility-scale solar, using data up to the end of 2023.

Over the past five years, Spain and Portugal combined have seen the largest increase in renewable power consumption of any area of Europe, roughly 25% higher than Germany’s (again using 2023 data)¹.

Grid resilience

In power circles, such an increase raises a question around the electricity grid’s ability to adapt to new generation sources, expressed in one way through the concept of “inertia”.

Inertia is a characteristic of power grids which allows them to withstand change, either in terms of demand or supply. Since we are used to power being generated by rotating machinery (gas, coal, nuclear and hydro all use turbines), the resulting current takes the form of a sine wave. In the UK and Europe, for example, the frequency of 50 hertz (Hz) is equivalent to a turbine rotating 3,000 times per minute.

Demand fluctuations, most famously described as people switching on kettles during television ad breaks, can be absorbed by small deviations in this frequency because on the end of it there is a physical asset turning round and round.

Generation sources which produce direct current, such as wind and solar, can only replicate the sine wave via power electronics; they cannot themselves create inertia. This lowers the grid’s resilience to sudden changes in supply or demand and, while it appears not to have created the Iberian issue on 28 April, it may explain why it took so long to rectify.

Experiments are underway to trial synthetic inertia provision from batteries, for example at the Hornsdale Power Reserve in Australia, but it’s safe to say we are a long way from widespread deployment and for the foreseeable future we are operating with an evolving hybrid system.

This is not just a challenge in Europe. The US is at a major inflection point for electricity demand: after nearly 20 years of just 0.4% annual growth in demand, the US Energy Information Administration predicts an inflection to annual growth of 2.8% for the next 5 years².

And this is on a grid system that is already 40-50 years old and is severely creaking. Non-weather-related outages in the US have already been rising sharply.

What could this mean for infrastructure and the pace of the energy transition?

The widespread and dramatic failure in Spain and Portugal’s electricity network highlights the critical nature of physical infrastructure assets. It’s also a reminder of how much our daily activities and the broader economy rely on energy infrastructure.

The generational shift in the way we generate electricity – specifically, by way of renewables – requires significant investment and reconfiguration of power networks. As policymakers and energy sector participants work to ensure resilience and energy security in power networks, significant further investment is required, in our view.

Large-scale energy storage deployments, new connections, more resilient transmission and distribution networks, back-up and peaking power generation, and international high-voltage connections are just a few examples of the potential investment opportunities for infrastructure businesses operating in this critical sector.

Power investment super-cycle

According to the International Energy Agency (IEA), global electricity grid infrastructure investment is expected to rise by more than 50% between 2023 and 2030 to c.US$600 billion³. The energy transition is arguably the world’s greatest ever construction project and is proving highly complex. As the world continues on a path of decarbonisation, deglobalisation and digitalisation, we believe the critical nature of infrastructure and reliance on hard assets will only rise.

The M&G Global Listed Infrastructure strategy has a long track record of investing in companies providing the solutions to these critical societal challenges. We believe the defensive nature of the companies with compounding cash flows and dividends, backed by long-term contracts linked to critical assets, is potentially appealing in these volatile macroeconomic times.

The strategy offers investors the potential of diversification, inflation protection from rising income generation and growth from the chronic underinvestment plaguing most global infrastructure networks.

The British philosopher Bertrand Russell once remarked: “In all affairs it’s a healthy thing now and then to hang a question mark on the things you have long taken for granted.” Perhaps that time has finally come for the humble electricity network.

¹2024 Energy Institute Statistical Review of World Energy.
²Source: BofA Global Research, US Energy Information Administration, June 2024.
³Source: IEA, quoted in The Economist, January 2025.