Large-scale deployment of new facilities in renewable energy has reshaped Spain’s electricity landscape. An incident in Spain disrupted the functioning of the electricity market, highlighting how wholesale markets operate. Historically, manufacturers, marketers and traders buy and sell energy for the following day, setting their lowest prices in the early morning hours when demand is weakest.
The accelerated expansion of green energy is altering the traditional price patterns. After a period of record prices during the height of the energy crisis — with peaks well above 500 euros per megawatt hour (MWh) — current prices remain elevated compared with pre-crisis levels, typically landing between 100 and 120 euros per MWh. What has changed recently is the timing of when the cheapest prices appear across the day.
Compared to the decades-long trend where the lowest prices cluster at night due to lower business activity and reduced energy consumption, the daily price chart over the past two years shows a different behavior, as seen in data from the Iberian Electricity Market Operator (OMIE).
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In months with longer daylight — particularly April through September — the cheapest electricity prices are clearly concentrated in the middle of the day. This shift is driven by the higher output of photovoltaic solar plants and a surge in self-consumption, which affects price formation.
Conversely, in autumn and winter — especially November through January — the lowest quotes relative to the market average still tend to appear at dawn, when solar output wanes and wind energy remains a steady contributor during these months.
“The deployment of cheaper electricity hours throughout the year is likely to be permanent and may intensify,” notes Francisco Valverde, an energy consultant who has analyzed hourly price differences in recent years. His assessment shows that changes have grown more pronounced this year. “In most days, electricity will be cheaper during daytime in the summer thanks to photovoltaics, while in winter it tends to be cheaper at night due to wind power,” he summarizes.
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As autumn and winter arrive, wind production typically rises, pushing prices down as supply meets demand. This expected trend depends on actual wind conditions, hydroelectric generation, natural gas prices, CO2 emission rights, and overall hourly demand. Antonio Delgado Rigal, CEO of Aleasoft Energy Forecasting, cautions that while the daytime cheap-price pattern is clear in summer, the winter outlook carries more uncertainty because multiple factors influence market outcomes.
The market’s marginal pricing system means the cost of the most expensive technology needed to meet demand sets the price for all others. Some marginal production technologies, including renewables, nuclear, and hydro, can enter at zero price when their output suffices to cover planned consumption. This phenomenon has been observed in the sixty zero-price hours recorded this year.
electricity zero euro
In recent months, renewables have expanded faster than anticipated, especially new photovoltaic plants. The number of hours with zero euro pricing in the wholesale market is rising — already more than sixty hours this year — with some hours priced at just a few cents. The market prices each hour separately, and the hours with zero pricing have been increasing significantly.
The electricity market clears prices through a marginal system where the last, most expensive technology needed to meet demand sets the price for the rest. Under this mechanism, certain marginal producers — including renewables, nuclear and hydro — can contribute at a zero price if their output covers overall consumption. That is the situation that produced sixty zero-price hours earlier this year.
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The combination of lower demand moments and the rising share of renewables in Spain’s generation mix explains why zero-price hours recur more often. These zero-price hours tend to cluster on weekends and public holidays when consumption drops.
Seasonal variation also matters: in winter, wind and other renewables help push prices down, including nighttime periods; in summer, reduced wind and the strong influence of solar photovoltaic generation shift price reductions toward the middle of the day. Since January, zero-price hours have migrated from early morning to central daytime hours aligned with peak solar radiation. The industry warns that persistent zero-price hours pose a cannibalization risk and may deter investment in new renewables if the market repeatedly hits break-even prices. They also signal potential systemic shortcomings, such as insufficient storage capacity or limited interconnections with the broader European grid, which could otherwise allow production to be shifted or stored to smooth price fluctuations.