EIB Backs €108M Green Investment in Iberdrola’s Valdecañas Hydro Complex

The EIB will provide a €50 million loan from its own funds and an additional €58 million through the Regional Resilience Fund (FRA), part of the broader European Union NextGenerationEU recovery initiative.

In a significant step toward strengthening Europe’s renewable energy infrastructure and reducing reliance on fossil fuels, the European Investment Bank (EIB) has signed two green loan agreements with Iberdrola totaling €108 million. The financing will support an ambitious project aimed at enhancing the pumping and storage capacity of the Valdecañas hydroelectric complex in Spain’s Extremadura region.

The EIB will provide a €50 million loan from its own funds and an additional €58 million through the Regional Resilience Fund (FRA), part of the broader European Union NextGenerationEU recovery initiative. The funding will be used to upgrade and expand the complex’s capabilities, reinforcing energy security, optimizing renewable integration, and supporting regional development in a designated cohesion region.

Enhancing Renewable Energy Storage and Grid Flexibility

The Valdecañas hydroelectric complex, which includes the Valdecañas and Torrejón-Tajo power plants, is being equipped with state-of-the-art reversible pumped-storage technology. This system allows water to be pumped to an upper reservoir during times of surplus electricity—typically from renewable sources like wind or solar—and released to generate power when demand peaks.

The upgraded complex will have a combined installed hydroelectric capacity of 225 MW, further reinforced with a 15 MW hybrid battery system capable of storing 7.5 MWh of electricity. These elements will work in synergy to increase the site's maximum pumping capacity to 313 MW and expand the overall energy storage capacity of the Tajo river system to 210 GWh.

Unlike traditional hydroelectric systems, pumped-storage facilities like Valdecañas operate in a closed-loop circuit. This design minimizes water consumption and environmental impact by continuously cycling the same water between two reservoirs, independently of seasonal rainfall or inflow variations. As a result, the plant enhances grid stability and supports the integration of intermittent renewables, while preserving natural water resources.

Environmental and Socioeconomic Benefits

The modernization of the Valdecañas complex is expected to make a substantial contribution to reducing greenhouse gas emissions. By improving the management and dispatch of renewable energy, the project will help displace fossil fuel generation, thereby lowering CO₂ emissions and supporting the EU’s climate targets.

Additionally, the initiative brings a boost to the regional economy. Construction and upgrade activities will generate 165 direct jobs and up to 500 indirect jobs, fostering skilled employment in a region where average income levels remain below the EU average. This aligns with the EIB Group’s Strategic Roadmap for 2024–2027, which emphasizes climate action and the promotion of economic and social cohesion.

Strategic Alignment with EU Recovery and Energy Security Goals

The €58 million portion of the financing sourced from the Regional Resilience Fund ties the project directly to Spain’s Recovery, Transformation and Resilience Plan. Administered by the Spanish Ministry of Economy, Trade and Enterprise and supported by local and regional authorities, the Fund aims to channel NextGenerationEU resources toward transformative environmental and social investments.

The EIB’s involvement in the project also supports the broader REPowerEU initiative, a strategic EU response to the energy crisis triggered by geopolitical tensions and supply chain vulnerabilities. REPowerEU focuses on accelerating the deployment of clean energy technologies and cutting dependence on imported fossil fuels. The Valdecañas project is a key piece in this effort, offering a dependable and flexible renewable energy resource that contributes to a more resilient European electricity grid.

Low Impact, High Value

Importantly, the works to increase the plant’s pumping capacity will make use of existing infrastructure, including the Torrejón-Tajo and Valdecañas reservoirs and pre-existing transmission lines. This approach avoids changes to current reservoir operation levels and minimizes environmental disruption, ensuring that the project remains sustainable and low-impact.

As Europe pushes forward with its energy transition, investments like the one in Valdecañas underscore the pivotal role of green finance, regional collaboration, and technological innovation. By reinforcing Iberdrola’s position as a clean energy leader and bolstering Spain’s energy resilience, the EIB is helping to lay the groundwork for a sustainable, secure, and inclusive energy future.