Electricity Prices in Iberia: Iberian Exemption, Gas Cap, and Wholesale Dynamics

Average electricity price for regulated rate customers connected to the wholesale market on Saturday is set to fall by 0.69% from Friday, reaching up to 298.25 € per megawatt hour (MWh), according to provisional data from the Iberian Energy Market Operator (OMIE) compiled by Europa Press.

For Saturday, this decline comes as the weekend reduces overall demand, while a higher share of renewable energy enters the mix. This combination helps the electricity price for regulated rate customers tied to the wholesale market dip to around 300 € per MWh for the first time in this week’s history.

Recent price pressures are partly driven by a heat wave affecting the entire country, which increases demand and reduces the contribution from renewable sources such as wind and solar photosynthesis. The result is higher wholesale prices and a tighter energy system scenario, impacting the market across the board.

Additional factors include tensions in gas supply amid ongoing geopolitical strains and maintenance work on key infrastructures. These elements feed into the Dutch TTF market, a European benchmark for natural gas, which is trading above 170 € per MWh after being around 80 € per MWh in mid-June. These dynamics influence electricity pricing in the Iberian market as suppliers balance gas costs with power generation needs.

For PVPC customers, the price is the sum of the wholesale market auction average and the compensation paid to combined cycle plants as part of the Iberian exemption designed to cap gas costs for electricity generation. This mechanism aims to smooth volatility and maintain affordability for consumers under regulated tariffs.

The average price in the wholesale auction, the pool, is set for this Saturday at 136.83 € per MWh, reflecting roughly a 14.97 € decrease from today’s price of 147.25 € per MWh. The official maximum price for the day is recorded at 176.16 € per MWh, and the minimum at 120.69 € per MWh, with values commonly updated around midday.

To this pool price is added the compensation of 161.42 € per MWh that benefits consumers under the measure, including PVPC customers or gas companies that participate in the Iberian mechanism, while the free market uses an indexed rate. These adjustments align with policies intended to moderate gas-driven cost fluctuations for electricity.

5.9% less than applying the measure

Without the Iberian exemption mechanism that caps gas costs for electricity generation, the Spanish electricity price would average 316.97 € per MWh. That would means about 18.72 € per MWh more compensation for regulated tariff customers, translating into a roughly 5.9% reduction in overall costs under the current scheme.

Compared with a year ago, the price for regulated-rate customers this Saturday shows a substantial increase, standing at approximately 241% higher than the 87.32 € per MWh recorded on July 16, 2021. The Iberian mechanism, which began operating on June 15, limits the gas price for electricity generation to an average of 48.8 € per MWh over a twelve-month period, providing a safeguard for the upcoming winter when energy costs typically rise.

The Iberian exemption path sets a gas price trajectory for electricity generation, with an initial step-up of €40 per MWh for the first six months followed by a €5 per MWh monthly adjustment through the end of the measure. This design aims to stabilize prices and protect consumers during periods of price volatility in global energy markets.

Cap on gas makes electricity 16% cheaper in first month

Since its introduction on June 15 in Spain and Portugal, the gas cap has driven a noticeable reduction in electricity costs for regulated-rate customers. Computations by Europa Press indicate a 16.2% drop compared with what prices would have been without the measure, depending on wholesale market movements.

Between June 15 and July 15, the average price for regulated tariff customers—obtained by combining the pool price with the daily compensation for gas-generated plants—stood at 251.26 € per MWh. Without the measure, this benchmark would have been around 299.9 € per MWh, implying an additional nearly 49 € per MWh in potential costs for consumers under the old framework.

These price dynamics illustrate how policy interventions in the Iberian energy market can influence affordability for households and businesses across the region. For markets outside the Iberian Peninsula, parallel discussions about wholesale prices, capacity, and the role of renewable energy sources continue to shape price expectations in North American contexts as well, underscoring the global nature of wholesale electricity pricing and the importance of market design that balances reliability, affordability, and energy transition goals.

Notes: Figures reflect provisional data and are subject to revision. Market participants, regulators, and analysts often compare pool prices, regional compensations, and policy measures to assess real-time affordability and long-term energy security across different jurisdictions.