Overview of Iberian Wholesale Electricity Prices and Policy Impacts
On a recent weekend, the wholesale electricity market, known as the pool, dipped to historically low levels for 2024. The average price for the day hovered around 0.59 euros per megawatt hour (MWh), marking the lowest daily average in about a decade. While the average is striking, the consumer bill does not simply mirror these numbers due to fixed charges, tolls, and system adjustments that are part of the final retail price.
For context, the day’s maximum price reached 3.5 euros per MWh from 19:00 to 20:00, yet for most of the day the price remained near zero euros per MWh or only slightly above that mark, according to provisional data from the Iberian Market Operator (OMIE) as reported by European press agencies. Through 20:00, about 13 hours were at or near zero euros per MWh, with another seven hours staying very close to that level throughout the day.
These conditions illustrate how, even with a very low pool price, the final electricity bill for consumers depends on a mix of factors beyond the pool itself. The pricing structure includes fixed costs such as network charges and system adjustments that can soften the immediate impact of the pool price on the bill.
Historical comparisons show that only in 2013 and 2014 were there days with similarly low daily days, when the average price for a full day fell below one euro per MWh. The notable decline in the pool is linked mainly to a weather system bringing heavy rainfall across the Iberian Peninsula, coupled with wind and snow that boost renewable generation, especially wind, in the energy mix. Weekend demand declines also contribute to lower prices.
In the first eight days of March, the pool’s daily average hovered around 12 euros per MWh, following seven days with prices under 10 euros per MWh. February’s average daily market price stood at about 40 euros per MWh, reflecting a 46% decrease from January and a sharp year-on-year drop of nearly 69.7% from the prior year after a series of storm events that boosted renewable output.
One notable policy development concerns the value-added tax (VAT) on electricity. The VAT rate briefly rose to 21% again in March after the wholesale price fell below certain thresholds in February, as indicated by the emergency measures decree. The government’s last council of ministers of the previous year approved increasing VAT on electricity from 5% to 10% and maintaining that level through the end of 2024, provided wholesale prices stayed above a specified threshold of 45 euros per MWh. In practical terms, most invoices for consumption in March and later carry a 21% VAT, while households benefiting from the social tariff are exempt from this increase, retaining a 10% VAT through 2024.
The pool price does not represent the exact final amount paid by consumers under regulated tariffs. A revised calculation method for the PVPC (price with annual consumption reference) was adopted in 2024 to include a balanced mix of short- and long-term price references, aiming to smooth sharp fluctuations while preserving short‑term price signals that encourage savings and efficient consumption. In concrete terms, the pool’s influence will be progressively reduced as futures references gain weight: 25% in 2024, rising to 40% in 2025 and 55% from 2026 onward, to better reflect market expectations without losing the benefits of transparent price signals.
The evolution of these figures and policies underscores how electricity markets blend immediate supply conditions with longer‑term planning and international trends. Analysts emphasize that while very low pool prices can provide relief for consumers at times, the actual bill is shaped by regulatory decisions, capacity mechanisms, and the evolving structure of price references used to calculate charges and taxes.
Overall, the current trend highlights the importance of renewable energy expansion, especially wind, and the role of favorable weather in shaping the daily cost of power. For households and businesses in Canada and the United States keeping an eye on wholesale dynamics, the takeaway is clear: local tariffs, tax policies, and regulatory mechanisms will continue to modulate how wholesale prices translate into retail costs, even when the day’s market price looks exceptionally favorable.
Market observers note that the mix of generation sources and policy choices will determine whether these low pool prices translate into meaningful savings for consumers or are offset by fixed charges and fiscal adjustments in the months ahead. As renewables contribute a growing share of power, price volatility may persist, but long‑term planning and energy policy will shape how buyers experience these fluctuations in everyday bills.