The Bank of Spain estimates that renewable energy installed since 2019 has reduced the wholesale price of electricity by 40% in 2024. Specifically, “in the first half of this year, the wholesale price of electricity was more than 40% lower than what would have been the case if wind and solar production had remained at their 2019 levels,” the organization estimates in an article published this Wednesday and prepared by Javier Quintana, from the institution’s Economic Situation Analysis Department.
The study estimates that the average price of electricity between 2017 and 2019 would have been reduced by 10 to 15% thanks to the contribution of renewable energies, while this reduction increased substantially from 2021, due to the increase in the installed capacity of these technologies, reaching 50% in the first half of 2024.
The agency also estimates that the wholesale price of electricity could fall by half in 2030 in the scenarios of deployment of renewable energy production envisaged in the update of the National Integrated Energy and Climate Plan (PNIEC) 2023-2030, while warning that there is considerable uncertainty, due to the evolution of different supply factors or the adaptation of demand to new levels of renewable production.
The paper notes that the relationship between renewable generation and electricity prices is not linear, which could accelerate the impact of wind and solar capacity deployment plans on future electricity prices.
Thus, an increase in the weight of solar and wind production from 20% to 30% has a relatively small impact on the wholesale price of electricity. However, if this increase is 50-60%, the expected price reduction is close to 25%. This is explained by the marginalist pricing system, in which the provision of the most expensive technology determines what the others charge.
The study highlights the “complementarity” between wind and solar and how “the coincidence of the two makes the savings greater than the sum of the contributions of each”, allowing to “completely displace” the marginal technology (normally, gas).
The article highlights that in addition to contributing to the climate transition, renewable energies play a very important role in reducing wholesale electricity prices, and that this importance “will probably increase in the future”. Among the uncertainties, it cites the viability and pace of execution of projects, the penetration of the electrification process of the activity and the ability to develop technologies to store the surpluses produced by renewable energies in certain sections of the day.
