Here’s why Spain isn’t as worried about rising energy costs amid Iran war

To hear Prime Minister Pedro Sanchez describe it, Spain is relatively shielded from the surge in oil and gas prices triggered by the war in Iran. While many global leaders worry about rising fuel costs, Sanchez argues that Spain’s rapid shift toward renewable energy, such as solar, wind, and hydroelectric power, has reduced its vulnerability. “Spain can demonstrate examples of how investing in renewable energy helps our households experience a lower impact from gas price increases,” Sanchez said in Brussels on Thursday (March 19).

He pointed out that, last Saturday, electricity prices in Spain were about seven times lower than in France and Germany.

So, is he right? Partly. Spain does have strong evidence to support its claim. Around 57 per cent of its electricity comes from renewable sources, roughly 10 percent above the European Union average. The country benefits from extensive solar farms, widespread wind turbines, and hydroelectric plants powered by its rivers. Favorable weather this year has further boosted renewable output.

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Additionally, about 20 per cent of Spain’s energy comes from nuclear power. Together, these sources often allow Spain to maintain lower electricity prices compared to countries like Britain and Italy, which rely more heavily on natural gas.

However, that’s only part of the picture. Renewables are not constant. There are times when sunlight is limited, wind slows, or drought reduces hydroelectric output. During colder periods, renewable energy alone cannot meet demand, making nuclear and gas power necessary to stabilize the grid.

This leads to a key issue in the electricity market. Wholesale prices are determined by the most expensive energy source needed to meet demand, typically gas. As a result, even when renewables dominate production, gas prices often set the overall cost. This dynamic benefits renewable and nuclear producers, who earn higher revenues. But consumers still face elevated electricity bills, often comparable to those in other European countries.

So what’s the full story?

Sanchez is correct that Spain’s electricity was cheaper than France's and Germany's last Saturday, but that situation is not consistent. “He’s cherry picking,” said Pedro Linares, professor of industrial engineering at Comillas Pontifical University in Madrid. Professor Linares explained that Spain recently benefited from favorable spring conditions and well-filled reservoirs after a rainy season. However, as summer approaches, water levels will likely drop, increasing reliance on gas. He also noted that electricity bills in Spain are affected by taxes and grid maintenance costs, which add to consumer expenses.

Spain’s energy system remains complex. Last April, the country experienced a widespread blackout lasting up to 10 hours in some areas. While the causes were multifaceted, it highlighted a key reality: Spain still requires a mix of gas and nuclear power to maintain grid stability alongside renewable energy.

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