The latest national snapshot shows Spain ending the year with electricity prices that echo a broader European pattern. On the wholesale market, the average price landed at 87.43 euros per megawatt-hour (MWh), marking a continued period of affordability among the major euro-area economies. Spain registered a price level that was roughly 58 percent lower than in 2022 and about 14 percent below the current, still-considerable market benchmark. In neighboring markets, price points were distinctly higher: Germany averaged 101.82 euros, while France and Italy hovered near two notable markers at 97.3 euros and 128.9 euros per MWh, respectively. Crucially, Spain’s price remained well below the combined regional average of 87.3 euros per MWh, underscoring the Iberian market’s relative competitiveness in 2023. This snapshot reflects ongoing volatility and the influence of cross-border energy dynamics on wholesale pricing across Europe [Attribution: market data and regional comparisons].
Industry observers, including the energy aggregator Grupo ASE, highlighted the favorable performance of Spain’s electricity price in their December monthly report. A standout feature of the year was the expanding share of electricity produced from renewable sources, which climbed by 15.7 percent. For the first time, renewables accounted for more than half of the annual electricity generation in the country, reaching 52.6 percent in aggregate output [Attribution: Grupo ASE December report].
The Iberian mechanism, often described as the Iberian exception, traditionally links gas prices to the price formation of other technologies. In 2023, this mechanism did not push prices downward in the wholesale market as it did in some prior years. The lower gas price helped cap some costs, but the central driver of price formation became the wholesale electricity price itself, rather than gas costs alone. Spain and Portugal have now been authorized by the European Union to apply this intervention within the EU’s broader, marginalist framework that rewards energy sources with the most competitive costs. As of the latest developments, the system governs all member states, folding in various energy inputs into the final price formation, with a continued emphasis on ensuring market efficiency and cross-country comparability [Attribution: EU authorization and mechanism overview].
According to the Association of Companies with Large Energy Consumption (AEGE), electro-intensive industries performed well in the latest barometer, with the daily market and forward prices offering a positive outlook for this year. Yet AEGE cautioned that despite broadly lower electricity prices in Spain, some companies with substantial energy demand still face higher relative costs than their French and German peers. This is due to their access to energy through more competitive contracts that, at times, keep costs above national market prices in their own countries [Attribution: AEGE barometer and contract differences].
AEGE provides a nuanced comparison for electro-intensive sectors: while German and French markets posted higher prices over the last twelve months, Spain’s measure for electro-intensive industry was about 93.14 euros per MWh at year-end. This figure exceeds the French price by more than twofold, even as the German benchmark showed a different trajectory, with a more modest final cost around 66.83 euros per MWh when adjusted for local measures and gas compensation schemes [Attribution: AEGE analysis on year-end pricing].
Projections from electricity futures markets, updated through December 31, suggest that Spain could sustain its price advantages into 2024, with expectations of a continued decline relative to 2023. The consensus points to a third consecutive year of lower average wholesale prices in Spain. However, analysts warn that the price of CO2 emission rights, which trended downward through much of 2023, is likely to rise again in the latter half of December, potentially lifting the cost base for primary resources such as electricity and certain fossil fuels, even as renewables remain a core driver of price formation [Attribution: futures market data and emissions trading outlook].