Spanish energy trends: low demand and volatile gas prices

Amidst a global landscape characterized by uncertainty and transformation, Spain's electricity sector faces both significant challenges and unprecedented opportunities for innovation.  

Electricity demand in Spain has remained relatively low since the pandemic. The economic landscape has become noticeably worse too, against a backdrop of increased levels of inflation across the globe. Factors including the war in Ukraine and the energy crisis continue to increase costs for large consumers of electricity. 

In the graph below, you can observe two notable trends: the disparity between electricity demand levels and gas prices in the TTF and MIB Gas markets.

In January 2020, demand was 5.7% higher compared to the beginning of this year. Throughout 2023 however, demand has decreased by 9.6% compared to the same period in 2020. 

The chart also illustrates the significant impact of rising gas prices. In 2020, the average annual gas price in the MIB Gas market was 10.25 €/MWh, while in the TTF market, it stood at 9.37 €/MWh.  

However, by October 20 2023, the cumulative average gas price in the MIB Gas market had surged to 39.50 €/MWh. This marks a substantial 285% increase. The TTF market saw an even more pronounced rise with an average price of 40.62 €/MWh. A 333% increase year-to-date. 

The stability of electric demand, despite economic challenges, provides a solid foundation. Several strategies must be considered to address these challenges.  

These include diversifying energy sources to reduce dependence on high gas prices, promoting greater energy efficiency, and exploring opportunities in sustainable electrification. Adapting energy infrastructure will also be essential to manage demand variability. 

Spain's energy sector stands at a crossroads, requiring a delicate balance between electricity supply and demand in a higher-price environment.  

The Spanish electricity industry will need to be agile and innovative to ensure competitiveness and sustainability amidst current economic and geopolitical complexities. Transformation opportunities exist, and making informed, strategic decisions is essential to steer the future of Spain's energy sector.