How is the price of electricity set in Spain?
Electricity prices are not set directly by anyone. They are determined by the hourly wholesale market auction.
This piece explains how the marginal pricing rule works, why the price changes every hour and why renewables don't always lower the bill.
The average spot price in 2025 was 65.3 EUR/MWh.
The historical peak was recorded in 2022, with an annual average of 167.5 EUR/MWh.
How the marginal pricing rule works
1. Hourly auction
Each hour, generators submit sell offers. Renewable plants offer at zero marginal cost (wind and sun cost nothing extra).
2. Merit order
The system accepts offers from lowest to highest cost until demand is met. The last accepted plant sets the price for everyone.
3. Single price for all
All plants receive the price set by the last plant to enter the market, regardless of their actual cost. That is why renewables lower the price — but not to zero.
Annual spot price evolution
2022 was the year of extreme price spikes driven by the gas crisis. Before and after show structurally high volatility tied to fossil fuel prices.
Annual spot electricity price in Spain
Source: OMIE - mercado ibérico
Spot vs PVPC comparison
Source: OMIE / REE
Hourly price distribution in 2025
28.7% of hours had a price above 100 EUR/MWh, showing that demand peaks still drive the real cost.
Hourly price distribution by range (2025)
Source: OMIE - mercado ibérico
Annual price history
| Year | Spot (EUR/MWh) | PVPC (EUR/MWh) | Min | Max |
|---|---|---|---|---|
| 2019 | 47.7 | - | 0 | 74.7 |
| 2020 | 34 | - | 1 | 68.9 |
| 2021 | 111.9 | 217.7 | 0 | 409 |
| 2022 | 167.5 | 287.3 | 0 | 700 |
| 2023 | 87.1 | 146.8 | 0 | 220 |
| 2024 | 67 | 131.3 | -2 | 193 |
| 2025 | 65.3 | 136.4 | -15 | 240 |
What the data tells us
1 Spot prices peaked at 167.5 EUR/MWh in 2022 due to the gas crisis.
2 The marginal pricing rule ties the price of all generation to the cost of the last accepted plant.
3 28.7% of hours exceeded 100 EUR/MWh last year, illustrating structural volatility.