The outbreak of war in Iran on February 28 and the subsequent closure of the Strait of Hormuz have plunged the world, overnight, into an energy crisis of alarming proportions. In the midst of this global chaos, a European country is resisting the challenge much better than its neighbors: Spain.
A shield in front of the market. To understand why electricity in Spain has not become more expensive at the same rate as in the rest of the continent, it is essential to look at how the electricity market works. The European system is “marginalist,” meaning that the most expensive technology needed to meet demand on a given day (usually gas) dictates the final Price of all electricity.
The day after the start of the conflict in the Middle East, the price of gas rose 55%, according to Euronews. However, the impact on Spanish bills is being cushioned, thanks to the fact that the share of clean energy in the country’s generation mix now exceeds 60%. Since 2019, Spain has added more than 40 GW of renewable capacity, doubling its wind and solar farms. Added to this structural deployment is a key seasonal factor: a solid spring “hydraulic cushion”, with the reservoirs located at 82.6% of their capacity.
The data of the Iberian exception. The X-ray of the European wholesale markets, reflected in the records of Energy-chartsconfirms this gap in a very visual way:
- The Spanish daytime miracle: Spain’s graphs during February and March show almost absolute dominance of renewable generation and hydro pumping. This massive injection sinks prices from 11:00 a.m. to 6:00 p.m., becoming free, or even registering negative prices, because many plants find it more profitable to bid at zero price than to assume the very high costs of stopping and restarting their machines.
- The fossil condemnation of Germany and Italy: The European contrast is devastating and explains the asymmetric impact of the war. German market data for the same period reveals a heavy dependence on non-renewable sources, illustrated by a thick gray band of fossil generation underpinning its system. The case of Italy is even more illustrative of the dangers of depending on foreign gas: its graphs show a huge constant load of non-renewable generation, which condemns the transalpine country to maintain a systematically high and flat price curve throughout the day.
The “green shield” night fissure: However, we are not invulnerable. As analyst Antonio Aceituno, from the consulting firm Tempos Energía, warns in Europa Pressthe Spanish balance is broken when evening falls. When the sun disappears, gas combined cycles begin to cover demand, returning tension to prices. This explains why in March the monthly average suddenly woke up to 64.05 euros/MWh, with nighttime peaks of up to 247.15 euros/MWh. It is empirical proof that, without massive batteries to guard the sun, at eight in the afternoon we are still at the mercy of what happens in the Strait of Hormuz.
Furthermore, time is against us. Antonio The Tempos Energía analyst warns that our precious “hydraulic shield” could begin to give way at the beginning of summer if the conflict becomes entrenched. In the worst case scenario, the June bill could jump above 100 euros per MWh, reaching the feared 120 euros between July and August.
A halfway transition. The current energy crisis has left an irrefutable lesson: renewables are our best social shield. The deployment of recent years has prevented Spain from suffering the same financial drowning as its neighbors. As the energy financing expert Gerard Reid reflects in Euronewsit is preferable to depend on China to import a solar panel once every 25 years, than to depend on oil and gas from the Persian Gulf every day.
But the transition is painfully incomplete. As long as lack of storage forces us to turn on gas plants when the sun sets, our pockets will continue to be hostage to global volatility. Whether due to a military drone over the Strait of Hormuz or due to political retaliation in the Oval Office, Spain’s true energy independence will not come until we are able to massively save the sun and wind that we have left over.
Imagen | Photo by Alexis Presa on Unsplash y Photo by Jakub Żerdzicki on Unsplash
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