The rise of renewables in Spain and their impact on prices

Spain has sharply reduced the influence of gas on wholesale electricity prices thanks to a strong expansion of wind and solar power. In the first months of 2025, wind and solar generation met about 46 % of electricity demand while fossil generation accounted for only 20 %. This surge in renewables meant fossil‑fuel generators set the price in only 19 % of hours, pushing Spain’s wholesale electricity price 32 % below the European average.

Data from January 2026 confirm the trend: wind contributed 32 % of total generation (up from 23.3 % the previous month), solar photovoltaic around 9.2 % and hydro 12.7 %. Nuclear remained a pillar at 20.6 %, while gas generation fell to 16.2 %, down from 21.1 % in December. Better wind and solar conditions explain this reduced dependence on gas.

The higher share of renewable energy correlates with lower wholesale prices. A BBVA Research analysis notes that increasing the renewable share from 45 % in 2021 to 65 % in 2024 cut wholesale electricity prices by 20 %. If Spain meets its PNIEC goal of generating 81 % of its electricity from renewables by 2030, prices could fall by another 20 %.

Wholesale price trends

Consultancy Haya Energy Solutions reports that in December 2025 daily prices ranged between €60 and €105/MWh, averaging around €80/MWh. In January 2026 the market became more volatile: prices topped €120/MWh mid‑month but dropped sharply later thanks to windy conditions and lower demand. Spain’s Ministry for the Ecological Transition expects average wholesale prices in 2026 to hover around €56.70/MWh, below the €65/MWh average in 2025.

How retail prices are formed

Households can choose between the regulated tariff (PVPC) and the free market:

PVPC tariff: the price varies every hour according to production costs, network tolls and taxes. Red Eléctrica publishes the hourly price that applies directly to customers on the regulated tariff. PVPC is volatile; a 4.66 % reduction in final bills is expected in 2026 thanks to falling wholesale prices.

Free market: suppliers offer fixed‑price or indexed contracts. According to the Electroenergy blog, companies pay between €0.05 and €0.10 per kWh for excess solar generation in 2025. Repsol pays €0.10/kWh, Naturgy €0.07/kWh and Endesa €0.065/kWh. These tariffs provide price stability, though some may have higher fixed charges or monthly limits.

Although the government has announced increases in regulated network tolls and system charges for 2026, official forecasts indicate households and small businesses will still see bill reductions of 4 %–10 % because the energy component is cheaper.

Self‑consumption, surplus compensation and virtual batteries

Self‑consumption continues to grow: 1,139 MW of new capacity were installed in 2025, bringing Spain’s total to 9.3 GW. The Spanish Photovoltaic Union (UNEF) highlights around 36,330 new residential installations, though the residential segment declined 17 % due to the end of tax incentives and lower compensation for surplus energy.

The surplus compensation mechanism allows households to sell unused solar energy back to the grid and deduct its value from their electricity bill. Average compensation prices range from €0.05 to €0.10 per kWh. Under PVPC, the value varies by hour (around €0.09/kWh), while in the free market suppliers offer fixed prices. A comparative table shows Repsol paying €0.10/kWh, Naturgy €0.07/kWh and Endesa €0.065/kWh.

For those wanting to maximise savings without investing in physical batteries, some companies offer a virtual battery service. This accumulates the value of surplus energy as euros and applies it to future bills or even second homes. The service can reduce bills to zero, but it depends on the compensation price and the contract’s conditions.

How generation affects the final price for consumers

Spain’s wholesale market is marginal: the last technology needed to meet demand sets the price for everyone. When demand is met mainly with renewables and nuclear — which have low marginal costs — prices fall. When combined‑cycle gas turbines are needed, the cost of gas and CO₂ allowances pushes up the final price. After the Iberian blackout of April 2025, the need for backup meant gas was responsible for 57 % of the final electricity price during May, underscoring that supply security still depends on gas.

For consumers this translates into volatility under the PVPC tariff. A combination of abundant wind and solar with a mild winter can lower the price of electricity, whereas cold spells or low renewable production — together with high gas prices — raise bills. The long‑term trend points toward greater stability thanks to more renewables and storage, but the transition will still include price spikes.

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