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Published on Friday, February 14, 2025 | Updated on Tuesday, April 8, 2025

Spain | Reaping the Benefits of Renewable Energy in the Spanish Economy

Summary

This study investigates how much the growing penetration of low-marginal-cost renewables contributes to lowering prices, and whether a ‘merit-order effect’ could limit the further expansion of renewable energy in Spain.

Key points

  • Key points:
  • Renewables help reduce electricity prices despite their reliance on weather conditions and the current lack of energy storage. The relationship between the penetration of renewable energy sources and wholesale electricity prices is non-linear and negative, driven by the low marginal cost of clean technologies.
  • From 2021 to 2024, the notable 20-percentage point rise in renewable energy share, driven by solar photovoltaic (PV) and onshore wind, reduced Spain’s wholesale electricity prices by nearly 20% (12.5% from 2021-2023 and 7.5% in 2024).
  • Lower energy prices have reduced solar and wind unit revenues, especially for solar. However, there is no clear evidence that lower energy prices are deterring renewable investment (a phenomenon referred to as "cannibalization").
  • Looking ahead, meeting the PNIEC targets could reduce prices by a further 20%. While plausible, the objectives may seem optimistic over five years. Outstanding issues—such as storage and interconnections— and the required investment, both public and private, will be decisive in determining the ultimate realization of these ambitious goals.
  • Sustaining the growth in renewables also requires essential regulatory advancements and investment to position Spain as a leader in the energy transition, ensuring a more competitive, sustainable and resilient future.

Geographies

Topics

Documents and files

Podcast (MP3)

The Spanish electricity market: boosting renewables

Spanish - April 8, 2025

Report (PDF)

ECW Reaping the Benefits of Renewable Energy in the Spanish Economy

English - February 17, 2025

Presentation (PDF)

Reaping the Benefits of Renewable Energy in the Spanish Economy

English - February 14, 2025

Authors

JC
Julián Cubero BBVA Research - Lead Economist
PM
Pilar Más Rodríguez BBVA Research - Principal Economist
RO
Rafael Ortiz Durán BBVA Research - Economist
PR
Pep Ruiz BBVA Research - Principal Economist
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