Spain has embarked on a broad deployment of new renewable plants, a move that is already transforming electricity production and helping to push energy costs lower. Projections for the coming years anticipate an even larger wave of wind and solar installations, which could drive electricity prices down substantially—potentially trimming costs by half by 2030, according to estimates from the Bank of Spain.
The share of wind and solar power in Spain’s electricity generation has risen sharply over the past five years. It climbed from about 26% of total energy generation in 2019 to more than 40% by mid-year. As renewables increase their share, the price of electricity tends to fall. This trend is already evident in Spain’s energy markets.
Without the massive rollout of wind and photovoltaic capacity, the wholesale electricity price—the market where producers and traders buy and sell the power that will be consumed the next day—would have been about 25% higher last year and around 40% more expensive in the first half of 2024, according to calculations in a Bank of Spain study. The organization’s projections suggest a further 50% price reduction by 2030 if the renewable expansion targets set in the National Integrated Energy and Climate Plan (PNIEC) are met, along with advances in electrifying more sectors of the economy and expanding energy storage capacity with batteries.
The electricity market, also known as the pool, sets prices through a marginalist system that makes the most expensive technology needed to meet demand set the price for all hours of the day. When natural gas plants set the price, costs rise (or spike) depending on international gas prices and other factors. When renewables—paired with hydroelectric and nuclear power—can cover demand, prices fall. In the past year, hundreds of hours have seen prices drop to zero, and there have even been negative prices for the first time in history.
The Oncoming Surge
The Bank of Spain warns that there are uncertainties around whether its forecast of electricity prices cutting in half by 2030 can be realized. Achieving this depends on hitting the PNIEC’s renewable expansion targets and on making significant progress in electrifying additional sectors and in expanding energy storage capacity with batteries.
Renewable energy is expected to play a pivotal role in reducing wholesale electricity prices, and this influence is likely to grow. However, the future price path remains highly uncertain and will be shaped by several factors, including the feasibility and pace of large investment projects to increase renewable generation, the rate of electrification across the economy, how demand aligns with the generation pattern of renewables, and the development of storage technologies to absorb surplus energy produced at different times of the day.
All these factors interact with the performance of energy markets and the broader energy policy framework. The coming years will test how quickly Spain can turn its ambitious renewable targets into tangible price relief for consumers while maintaining grid reliability and energy security. The evolving dynamics of renewables, storage, and demand response will determine whether the projected price reductions materialize and how quickly they unfold, even as global energy markets continue to experience volatility and shifts in policy and investment priorities.