Spain has done something few countries have: it has decoupled electricity prices from the cost of fossil fuels, so the price of gas or coal no longer sets the market rate. In fact, fossil fuel prices dictated the overall electricity price only 19 % of the time in 2025, compared to 75 % in 2019, according to a report by Ember. This has pushed Spain’s average wholesale price 32 % below the European average. And yet, retail prices have remained largely unchanged. So, why hasn’t the fall in wholesale prices been reflected in the monthly bill?
Let’s break it down. Since 2019, Spain has added more than 40 GW of new solar and wind capacity, doubling its renewable power. In the first half of this year, 46 % of electricity generated was from renewable sources. But on 28 April the country was struck by a major blackout. A concatenation of grid failures and lack of operational margin left much of the country in darkness for hours.
The preliminary report by the European Network of Transmission System Operators dismissed renewables as a direct cause, but it did reveal a structural problem: the Spanish grid was not prepared for so much intermittent generation without sufficient flexibility. Since then, the Spanish network operator, Red Eléctrica, has been operating the system in “reinforced mode,” activating more gas plants to stabilise the voltage.
According to Ember, that strategy has come at a high cost: in May, gas-based grid services represented 57 % of the final electricity price, versus the usual 14 % before the blackout.
The underlying problem is that while Spain produces more clean electricity than ever, it cannot be fully utilised. The lack of grid capacity, storage, and interconnections is leaving thousands of megawatts of solar and wind energy to go waste. When there is an excess of clean energy and it can’t be exported, it gets “curtailed.”
The curtailment of renewable energy has tripled since the blackout, rising on average from 1.8 % to 7.2 %, reaching a peak of 11 % in July.
The cost of balancing intermittent sources of energy in the grid is enormous, reaching €1.5 billion in the first eight months of 2025. On top of that, the planned ‘re-reinforced mode’ (essentially additional gas backup) could add another €3 billion, potentially increasing fixed tariffs for consumers. This is not helped by the fact that for every €1 Spain spends on generating renewable energy, it only invests 30 cents in the electricity grid — the lowest in Europe.
Moreover, the country lags in battery storage, ranking 13th in Europe in terms of battery deployment, with only 120 MW installed, covering less than 1 % of its annual renewable generation.
The cost of keeping the grid “under tension” is passed directly to bills, even though the wholesale price is low. The wholesale market price only covers approximately half of the electricity bill (the so-called “energy component”). The rest — grids, tariffs, taxes, system stability — doesn’t move in tandem with the wholesale cost. That’s why the fall in wholesale prices doesn’t automatically translate into lower bills.
This is also the conclusion of a study by Daniel Fernández Méndez and Manuel Fernández Ordóñez, professors at the Universidad de las Hespérides, which warns that Spain’s energy planning has relied too heavily on a single metric: the levelised cost of electricity (LCOE). While LCOE measures how cheaply each technology can generate power, it ignores when that power is produced and the costs of integrating it into the grid. The result, the authors argue, is an energy mix that looks cheaper on paper but proves costlier and more unstable in practice.
According to the researchers, Spain’s problem isn’t renewables themselves, but how they are integrated. They argue that energy policy must align with industrial strategy to attract electricity-intensive uses like data centres, manufacturing, or hydrogen production, that can absorb cheap megawatt-hours and make the system more economically viable.
Until that alignment happens, Spain will remain a country where electricity is cheap to produce but expensive to deliver.
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