Electricity prices in Spain: What to expect in 2025
Understanding the anticipated changes in electricity costs and how they may impact your household budget
Staying informed about electricity price trends in Spain is essential for both individuals and businesses. It enables effective budget management, encourages the adoption of energy-efficient practices and supports informed decisions regarding environmental impact. By understanding these changes, you can adjust your habits and strategies to minimise costs and promote responsible energy use.Recent trends in electricity prices and forecast for 2025
In 2023, Spain’s electricity prices experienced fluctuations, with the average price closing at €60.26 per megawatt-hour (MWh). The following year, 2024, saw a dynamic evolution with significant variations throughout the year, resulting in an average price of €61.90 per MWh.
Looking ahead, forecasts suggest a relative stabilisation of electricity prices in 2025, albeit with some uncertainty due to various market factors. The average annual price in the wholesale market is expected to hover around €75 per MWh. This projection is optimistic compared to historical peaks but acknowledges the inherent volatility of the energy market.
Notably, approximately 42% of Spain’s energy consumption is anticipated to come from renewable sources in 2025. This increase in clean energy production could help reduce costs and stabilise prices.
To protect vulnerable consumers and promote energy efficiency, the Spanish government has extended various energy aid measures until June 30, 2025. These include the Electric Social Bonus, offering discounts of 50% for vulnerable consumers and 65% for severely vulnerable consumers from January 1, 2025. These discounts will gradually reduce to 35% and 50%, respectively, from July 1, 2025, and will remain in effect indefinitely.
Additionally, personal income tax deductions for investments in energy efficiency are available until December 2025. Taxpayers can benefit from deductions of up to 60% for energy efficiency improvement works in homes. Moreover, a 15% deduction for purchasing plug-in electric vehicles and charging points is extended until the end of 2025.
Understanding electricity pricing in Spain
Electricity costs in Spain are determined through a complex system combining the wholesale market and government regulations. In the wholesale market, energy producers offer electricity, and retailers purchase it for their customers through a process managed by the Iberian Energy Market Operator (OMIE). Daily prices are set for each hour of the following day based on supply and demand, with the final price determined by the last supply needed to cover demand, using the Euphemia algorithm across the European Union.Several factors contribute to rising electricity prices:
- Natural gas costs: Increases in natural gas prices, essential for electricity generation, significantly impact electricity costs
- Energy demand: Extreme weather conditions can lead to higher electricity consumption for heating or cooling, increasing demand and prices, especially during peak hours
- Renewable energy availability: Periods of low wind or solar energy production necessitate the use of more expensive sources like gas or coal plants, driving up prices
- CO2 emission costs: Rising costs of CO₂ emission rights increase power plant expenses, which are passed on to consumers
- Post-pandemic recovery: Global energy demand has surged during the post-pandemic economic recovery, putting additional pressure on supply and elevating prices
Tips to save on your electricity bills in Spain
To mitigate the impact of changing electricity prices, consider the following strategies:
- Time-of-use tariffs: Shift high-consumption activities to off-peak hours, typically at night or on weekends, to take advantage of lower rates.
- Energy-efficient appliances: Replace old appliances with models rated A or higher for energy efficiency to reduce consumption.
- Efficient lighting: Use LED bulbs and install home automation systems to control lighting and air conditioning efficiently.
- Temperature management: Maintain appropriate indoor temperatures (19°C to 21°C in winter and 24°C to 26°C in summer) and improve home insulation.
- Solar panel installation: Consider installing solar panels to generate your own electricity and reduce reliance on the grid.
- Review contracts: Periodically assess your contracted power and compare offers from different suppliers to ensure you're getting the best deal.
- Adopt responsible habits: Turn off lights and appliances when not in use, use power strips with switches to avoid standby consumption, and operate appliances efficiently.
- Switching to a different supplier: Your electricity bills may be high because of the energy company you are with. It might be worth conducting a free comparison between energy suppliers to see if you could save money by changing to a different company.