Spain | After the Blackout: A Subtle Shift in Risk Management

Summary

While the Iberian day-ahead market operated normally after the April 2025 blackout, May saw an increase in REE's security-driven balancing costs. These measures, implemented to reduce systemic risk, led to higher wholesale prices, highlighting the inherent trade-off between reliability and affordability.

Key points

• Key points:
• A sudden grid failure highlighted the operational complexities of integrating variable renewables, with root causes tied to low system inertia and underdeveloped energy storage amid soaring solar and wind penetration.
• Around the dates of the blackout, no structural change was observed in the merit order dispatch, and daily market behavior was not altered. However, the breakdown of wholesale price components reveals that adjustment services accounted for up to 60% of the total in May 2025, suggesting that REE effectively established a "risk premium" through preventive activations.
• Analysis identifies security-energy volume as the key driver of adjustment-service cost changes, and notes that while June data hint at a moderation, the newly passed Royal Decree-Law 7/2025 may institutionalize more robust grid-security measures.

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