Domestic solar energy is on the rise in Spain
Recent shifts in the energy market show wholesale electricity prices dipping sharply. The market, where traders buy and sell energy for the following day, has seen the number of hours with zero euro prices rise steadily. This Sunday marked sixteen straight hours at zero price, and this year has already logged eighty five hours at or near zero, with hundreds more under one euro. The trend is driven by a surge in renewable energy production that lowers costs, but it also creates profitability challenges for green energy companies that still must cover fixed costs even when prices collapse.
Industry observers note that renewable sources have always acted as price dampers in the electricity market. Still, persistent zero euro prices do not translate into good news. Low prices help consumers but must be balanced by sufficient production margins to sustain ongoing operation and future investment. A representative from APPA Renovables emphasized the need for production costs to be covered even as prices fall [APPA Renovables spokesperson].
APPA estimates show that renewable generation reduced the wholesale market price by about 43.10 euros per megawatt hour last year. Without renewables, the average would have been 210.62 euro per MWh instead of 167.52 euro per MWh. The association notes that historically renewables have lowered prices for the market, but the current dynamics threaten the profitability of existing and future green projects if this trend continues. If costs cannot be recovered, some technologies may struggle to remain profitable [APPA Renovables analysis].
The market operates on a marginal pricing system where the price is set by the most expensive technology required to meet demand at every hour. Some energy sources, including renewables, nuclear, and hydropower, can enter at zero price when they are sufficient to cover demand. This explains why prices have hovered at low or zero levels for extended periods over the last year.
Investment stall risk
The renewable sector warns that the ongoing squeeze on electricity prices could slow investment. Cannibalization concerns arise because rapid expansion of renewable capacity may erode revenue for existing plants, potentially delaying or halting new green developments.
Industry leaders urge decisive policy action. Without intervention, investment could slow or vanish. A representative from APPA Renovables called on government measures to boost electrification of the economy, enhance demand, and reduce oil and gas dependence. Expanding energy storage is also encouraged to prevent waste during periods of high production and low demand.
There is worry that long delays in funding could derail the renewable expansion timetable set by the government for 2030. APPA notes that several government targets look unattainable if the current pace continues, citing macroeconomic impacts and the need for stable investment flows to meet planned capacity additions. Government figures show substantial installations last year, but experts say more capacity must be added annually to hit the 2030 goals.
More cuts and more ‘Iberian exceptions’?
Since the energy crisis began, Spain has implemented a consumer protection shield to cushion price shocks. Many measures are due to expire at year’s end, and continuation depends on decisions at the national level and, in some cases, approval from the European Union. Some EU requirements could allow extensions beyond this year if the bloc agrees to reform and maintain crisis-era provisions. One temporary framework that was linked to the Ukraine crisis is set to end, unless renewed.
Spain has advocated extending the European framework and has signaled a readiness to maintain certain protections until markets normalize. Measures currently in force include price ceilings designed to prevent steep electricity increases and to shield households from sharp price spikes.
Among the existing tools are a price cap of 67 euros per megawatt hour for nuclear, hydro, and renewable contracts to limit extraordinary profits during the crisis. There is also talk of an Iberian mechanism intended to reduce final electricity prices by moderating gas costs. Renewable industry representatives argue that price caps must be applied with certainty and consistency, warning that abrupt or arbitrary changes hinder strategic planning and investment decisions.
APPA leaders stress the importance of knowing whether protections will endure. Without clarity, firms cannot design long-term strategies, and the sector’s growth could suffer despite strong project momentum.
Macroeconomic impact
Renewables have continued to expand, adding to total installed capacity and contributing to economic indicators. New power plants and high market prices in some periods have supported a measurable uplift in renewable sector output and employment. The sector’s contribution to GDP and job creation remains significant, reflecting direct and indirect impacts across the economy.
Energy price dynamics have simultaneously driven savings by reducing fossil fuel imports. The shift away from imported oil and gas has yielded substantial economic benefits and helped curb CO2 emissions, underscoring renewables as a critical component of Spain’s energy strategy, even as price volatility challenges persist [economic assessment reports].