Spain's wholesale electricity prices surge 59.5% in 24 hours

Electricity prices spike 60% in a day, straining household budgets

The cost of electricity on Spain's wholesale market surged 59.5% this Thursday in just 24 hours, reaching €90.14/MWh, compared to €56.51 on Wednesday. The trigger, according to circulating reports, is the conflict in Iran and the resulting tension in the Strait of Hormuz, where approximately 200 oil tankers pass daily. This rise is not an isolated event: it coincides with increased costs for fuels, gas, and groceries. The lingering question is how much of this mix is due to wartime circumstances versus poorly designed energy structures.

Strait of Hormuz and the domino effect on energy

The partial closure of the Strait of Hormuz is the epicenter of the crisis. According to available data, since Monday only a handful of tankers have crossed, whereas the norm is 200 per day. Adding to this, Qatar has halted LNG production and Iraq has stopped oil output. The result: crude oil has climbed to $85 and liquefied natural gas (LNG) has risen by 80%.

Comparisons with the 1973 crisis are not unfounded. Some argue that if the strait remains closed and regional energy infrastructure suffers damage, the impact could rival the oil embargo from half a century ago. The difference is that Spain was less dependent on LNG then, while today hydrocarbons and gas account for 70% of imports, according to cited data.

The Spanish electricity market feels the blow with a delay but with force. The marginalist system, which sets the price of all electricity based on the most expensive source needed to meet demand, amplifies any increase in gas costs. Hence, renewables, which should lower bills, do not prevent prices from skyrocketing when gas prices soar.

Why do electricity prices rise if renewables are cheap?

The paradox is evident: Spain has 48 GW of installed photovoltaic capacity, according to figures in circulation, yet the wholesale price doubled in one day. The explanation lies in market design. Renewables enter with near-zero marginal cost, but the final price is set by the most expensive technology dispatched. If gas is sky-high, bills rise even if the sun shines.

Some defend that the problem is not a lack of renewables but a lack of storage. Batteries would allow shifting surplus from midday to peak hours, reducing dependence on gas. Projects using emerging technologies, such as iron-air batteries, are mentioned, promising very low costs although with lower efficiency and cycles than lithium-ion. The full calculation, with demand curves and hourly prices, shows a surprising difference.

Meanwhile, consumers face extreme volatility: hours at €0.046/kWh at noon and nearly €0.40/kWh in the afternoon. Managing appliances becomes a risky sport.

Impact on wallets: gasoline, gas, and grocery baskets

Electricity is not the only front. Gasoline and diesel are already about 20 cents more expensive than the previous week, according to cross-referenced data. March inflation is expected to be brutal, not the cosmetic version published by official indices.

The effect extends throughout the chain: production, transport, and distribution of any product incorporate energy costs. Some calculate that fixed expenses for the average citizen could rise between 20% and 30% if electricity, gas, fuel, and food are summed. A family with a variable-rate mortgage and a gasoline car notices it in every bill.

The comparison between fixed and variable tariffs adds another layer of inequality. Those with guaranteed fixed prices for several years laugh at the spot market. Those on variable rates, who represent 65% of consumers according to data, suffer the volatility. The question is how long that advantage will last for the former: when renewal comes, fixed prices will be recalculated upward.

Electric cars under scrutiny

The rise in electricity costs reopens the debate on the viability of electric vehicles. Those who defended EVs as a refuge from oil dependency now see that electricity also rises. Defenders respond that electric consumption remains much cheaper per kilometer than gasoline, even with high prices, and that the energy mix is more diversifiable than oil.

Critics point out that a 100% electric fleet would strain the grid, especially if all cars charge simultaneously. The solution would involve smart charging and rational use, but this implies habit changes not everyone is willing to accept. Additionally, it is suggested that the State will eventually tax car electricity once fuel revenue drops.

What happens to nuclear power and electricity prices?

At the heart of the debate is the role of nuclear energy. It is noted that part of the production halt in dispatch corresponds to nuclear plants, adding pressure to the system. Nuclear power, which does not depend on gas or oil, could cushion peaks if kept operational, but its continuity is in question.

Speculation also plays its part. Some denounce that oil companies sell fuel bought months earlier at cheap prices but charge the day's price. It is the classic rocket and antiestéticather effect: it goes up like a rocket when crude gets expensive, down like a antiestéticather when it gets cheaper.

With this outlook, the question is not whether electricity will fall, but when and at what cost. Are we facing a temporary episode or an energy regime change that will force us to rethink everything from heating to transport?