So, what is a bubble? A bubble represent a point in the market where expectations of future returns are higher than reality. This happens when the price of investment instruments on the market rise to a point that exceeds a reasonable valuation and is not sustainable; the famous missing money problem.

However, A deep-dive look into the energy market would lead us to conclude that Spain is not in a bubble… yet. Kim Keats acknowledges that when all energy demand is covered by renewables, prices will drop, but a strong market can balance itself and regulate itself.

According to Manuel Cabrerizo, the project market also remains balanced and does not present a collapse in prices; something that would be evidence of an economic bubble. However, there is a big difference in the number of MW under development and the number of projects that reach their final stage. The project market may seem like a bubble on the supply side, but demand remains strong.
Furthermore, regarding off-takers, auctions may offer an outlet at these uncompetitive prices, but the question remains whether this will lead to better prices in the future and whether this will allow the private market to develop naturally. This is expected to happen over time as new off-takers will increase the level of competition. More off-takers on the market will balance the power between buyers and utilities, adjusting prices to a sustainable level avoiding a bubble.

The Spanish photovoltaic market achieved incredible growth rates in the last year. According to Keats and Cabrerizo, this does not mean that the market is going through an economic bubble. Prices in the energy market may be falling, but for the moment, the market can regulate itself and absorb the energy that enters onto
the grid.

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