Translated by Giulia Maffeis
Since February 2024, Spain has witnessed an unprecedented collapse in electricity prices, with a drastic reduction to just 4.80 euros per MWh, significantly lower than neighbouring countries Italy, Germany, and France, where, for example, the cost remained at 68.86 dollars per MWh. This significant drop was accompanied by a phenomenal increase in solar and wind energy production in the country, even leading Spain to become an energy exporter as of February 21st.
This decision was driven by the growing production of renewable energy desired by the Spanish government, which reached record levels during the year. Spain has indeed made significant investments in the RES sector over the last 10 years, mainly focusing on solar and wind energy. These efforts have led to a substantial reduction in dependence on fossil energy sources and greater energy independence for the country.
The recent months have also seen positive influences of weather conditions; thanks to recent disturbances, wind power production in the Iberian Peninsula has surged. For instance, between 1 PM and 4 PM on Easter Monday, electricity cost -0.01 euros. The same situation had already occurred in March when Spanish operators were able to purchase electricity wholesale for zero euros. All thanks to Cyclone Nelson, which, with gusts of wind up to 100 kilometers per hour, maximized energy production in the numerous wind farms.
This positive trend has brought clear benefits to Spanish citizens, who have been able to benefit from lower retail prices, while the country's utilities have seen a decline in profits due to low wholesale electricity prices.
However, this situation does not reflect in a necessary vertical decrease in consumer bills: in response, the VAT on electricity has been immediately raised from 10% to 21%.
According to El Pais newspaper, the government had announced its intention to maintain the VAT on electricity at 10%. The government had reduced the VAT on electricity from 21% to 10% in June 2021, at the beginning of the turmoil related to the energy crisis. One year later, during the Russian offensive in Ukraine, the VAT was again reduced from 10% to 5%. Now, the reverse path is being taken. This scenario highlights the complexity of the ongoing energy transition,in Spain as in many other European countries. Despite success in the field of renewable energies and the increasing dependence on clean sources, important challenges remain to ensure fair and sustainable access to energy for all citizens.
However, Eurostat data show that Spain is one of the most virtuous European countries regarding renewable energy production, and the future prospects of the energy sector appear promising, with forecasts indicating continuous growth in solar and wind energy production. Hydroelectric, previously the country's main source of renewable energy, now contributes approximately 10% to Spain's total energy production.
Many energy consulting firms, such as Rystad Energy, therefore indicate that the Iberian Peninsula is well positioned to exceed 50% of its energy needs from renewable sources, confirming its leadership in the sector and its commitment to a sustainable energy transition.
However, it is important to remember that renewable energies are heavily influenced by environmental factors such as wind, sunlight, and precipitation. Therefore, it is essential to develop energy policies that take these factors into account and promote the diversification of energy sources to ensure a stable and efficient energy supply.