Rising electricity costs across Europe are reshaping competitive dynamics. If one looks at the broader picture, Spain’s electricity price is cheaper than Germany’s and closer to France’s, a trend that could influence the competitiveness of Spanish industry. This observation was highlighted by a senior economist from the Bank of Spain during a Tuesday address at the annual meeting of gas industry employers, Sedigas. While drawn from industry insights, the remarks acknowledge the current pricing environment and its implications for producers.
Energy-intensive sectors face costs that can account for a large share of total expenses. According to monthly estimates from the Association of Companies with Large Energy Consumption (AEGE), Spanish industrial consumers paid 181.89 euros per megawatt-hour (MWh) in May, compared with 195.50 euros per MWh in Germany. In France, the price stood at 123.18 euros per MWh, markedly lower than in Spain, although the gap has narrowed compared with earlier months. In the recent past, Spanish prices were roughly twice those in France, underscoring a shifting price dynamic across the region, even as energy markets move with volatility.
These figures reflect a snapshot of a rapidly changing landscape and cannot be directly compared to a year ago. Then, Spain paid around 76.95 euros per MWh, while France and Germany registered 35.59 and 48.67 euros per MWh, respectively. AEGE’s general manager, Fernando Soto, notes that the latest price data, though publicly available, indicates that this year’s wholesale prices in Spain may be lower than those seen in the other two countries. Ongoing projections for the electricity market suggest a continued divergence in wholesale prices, with Spain often trading at a lower level than its neighbors for this year and the next, albeit within a context of regional volatility.
Spain exports more to France than it imports through the gas pipeline from Algeria
AEGE estimates cover several supports: compensation to large industry for indirect CO2 emission costs, within the limits set by the European Commission up to 244 million euros in Spain; a temporary reduction of tolls of up to 80 percent as part of a shock plan to ease war-related effects; and a permanent bonus of 85 percent of fee receipts, among other measures.
In France, the final price to producers is shaped by an ARENH rate, standing at 42 euros per MWh, plus 38 percent of market price; Germany, by contrast, tends to rely on bilateral contracts with marketers, favoring long-term fixed pricing. In Spain, more than 70 percent of industry purchases occur directly on the wholesale market, meaning the pool price clearly influences costs. AEGE’s assessment highlights this as a critical hurdle for Spanish industry, since pool prices feed directly into the cost base for the majority of producers.
The government has explored policy avenues to stabilize prices. A long-term contract approach was discussed, aiming to exempt electricity companies from deductions linked to lost profits if they commit to fixed-price contracts. The employers’ association has noted that offers fixed to gas-indexed prices have been rare. During a congress held on November 30, Soto argued that companies did not routinely offer prices tied to gas, and when they did, they tended to be deterrent. Representatives from the large electricity users’ sector (Aelec) have called for a tariff framework similar to France’s ARENH, albeit without widespread success. One executive even suggested that including environmental taxes could push prices up by roughly 55 to 60 euros, a figure he described as appealing but not reflected in existing contracts.
Consequently, there is pressure to establish contracts that are insulated from pool fluctuations and can guarantee a competitive fixed price for industry. If France can maintain a wholesale price near 42 euros, this sets a benchmark that is difficult for Spain to match, as described by AEGE’s leadership. Germany’s approach, centered on long-term bilateral contracts, presents another contrast, though specifics vary by company and contract type. The focus remains on securing pricing agreements that deliver stability for several years and shield producers from sudden market spikes.
Despite the absence of new long-term offers, industry players are pushing for alternative measures from AEGE: auctions at marginal price and other mechanisms that could provide a predictable cost base. The government has signaled plans to introduce auctions by power companies for a portion of their output from nuclear, hydro, and wind sources, but implementation has not yet occurred. Observers suggest that avoiding gas-polluted rates remains a priority, with the goal of minimizing volatility and preserving competitiveness for large electricity users. AEGE stresses the importance of policies that deliver reliable, fixed-price contracts anchored to the pool but insulated from rapid market shifts, enabling industry to plan with greater certainty. Analysts note that creating such arrangements is essential if Spain is to sustain a manufacturing sector capable of competing on a level playing field with its European peers, while balancing broader energy and environmental objectives.