This article is republished from The Conversation under a Creative Commons license.
On April 28, 2025, an unprecedented collapse of the Iberian Peninsula’s electricity grid brought Spain and Portugal to a standstill. The likelihood of this ever happening was extremely low and—speculation about its causes aside—the episode has caused serious social disruption, as well as economic losses at all levels.
Spain’s electricity comes from a range of sources, including renewables (which are inconsistent by nature), fossil fuels and nuclear power. A system operator centralizes the power offers from producers, creating an aggregate supply that matches the demand requirements of the distribution companies. The electricity is then sold, either directly to consumers, or to smaller local companies.
These market clearings, as they are known, take place 24 hours in advance (the “day-ahead market”), leaving open a daily market (“spot”) for occasional fluctuations in order to prevent any system failure (“fall-out”). Producers also undertake to fulfill medium and long-term contracts, supplying the electricity that they have committed to in each period.
All this generates an amalgam of wholesale prices that the system must administer, while REDEIA (the commercial name for the Red Eléctrica de España, the Spanish National Electricity Grid) distributes the energy generated.
Wind generators in Rubió, Catalunya, with a view of Montserrat. Image by Mormig (Public Domain) via Wikimedia Commons.
Renewables Strain the System
In addition to wholesale prices and different end-consumer tariffs, the increase in renewable energy supply is, somewhat paradoxically, destabilizing the system. Energy generated by renewable resources represents, on average, more than half of total generation. Renewable energy sources have a raft of well-known benefits: their installation costs are ever-decreasing, they are environmentally friendly, and they need almost no maintenance.
However, fossil-fueled power plants still have to cover any disruption, both during the day (due to low performance of solar and wind facilities, for instance) and at night (due to the absence of solar energy). They have to be active at all times, contributing to a substantial increase in the market price, although renewables do lower the overall market price.
In addition, the increase in photovoltaic and wind energy fed into the grid can cause severe surges. The current grids are not prepared for them—Spanish officials have cited a “very strong oscillation in the electrical network” as one of the blackout’s causes—so the system removes them from the supply.
The grid also has to manage energy flows in both directions due to the surplus from small renewable producers (mostly households). This places an additional strain on the grid, both at a physical level and in terms of bureaucratic system administration, all of which affects its resilience.
Spain is currently in the process of shutting down nuclear plants, which will mean reduced production. This should be justified not only on a technical but also on a social level, especially since the European Union has declared nuclear to be a clean, low-carbon energy source.
Nuclear power plant in Vandellòs (Tarragona). Image by Jorge Franganillo (CC BY 2.0) via Flickr.
Dynamic, Fluctuating Demand
The events of April 28th raise one big question: can our current power generation systems meet an ever-growing demand that is also increasingly dynamic and fickle? The immediate answer is no. Not only is the demand for electricity rising and fluctuating more than ever—accentuated by the rise of servers and data centers powering artificial intelligence (AI) systems—but electricity generation is also more diverse in its composition and origin.
In other words, the cost of generating and transmitting a kilowatt depends on whether it is generated by renewable, nuclear or thermal plants, what time it is generated, and the distance to be covered by the network between its origin and final destination.
There is a growing trend in the EU to unify electricity generation systems and transfer energy between national systems. There are already unified markets such as Mibel (the Iberian Electricity Market, which covers Spain and Portugal) and NordPool (which covers the Nordic countries), with energy exchanges to neighboring markets and networks. Some projects suggest going even further and centralizing energy distribution at European level.
One significant advantage of a centralized energy distribution system is the diversification of production, as it provides greater flexibility, not only in terms of generation plants but also in terms of the resources used. In this sense, the rationalization of the system is increased by greater technical efficiency and the possibility of offering final prices closer to the marginal cost of production, reducing the market power of the generating companies.
However, this system also increases the risk of contagion in the event of any negative shock, be it a cyber-attack, a severe technical problem or a natural disaster. The events of April 28th are a clear example of this: almost all of Spain and Portugal and some areas of southwestern France were affected. The disconnection of the Iberian subsystem prevented blackouts in the rest of Europe but, at the same time, prevented energy transfers from other European regions to the affected area.
Although the Mibel market and energy transfers with neighboring France ensure a more efficient and secure distribution of electricity, the consequences are unpredictable in the event of a massive system failure.
Solar panels on apartment buildings in Braga, Portugal.
The Future: A Mixed System
The Iberian blackout leaves questions open about the future of electricity production and how it should be distributed and marketed. Increasing power generation outside the centralized system—with small-scale generation and consumption units—seems a good way to manage demand, making it less vulnerable to a widespread blackout and shifting resource management to the consumer, which undoubtedly increases efficiency.
At the same time, a centralized system must be in place to ensure supply for certain economic activities with high electricity demand (such as manufacturing), to ensure the operation of networks such as railways and phones, and for precautionary reasons.
The increase in demand and the improvement of renewable energy technology should shape an electricity market with less power for large energy companies. It should also help to rationalize distribution grids and increase versatility between centrally produced energy and contributions to the system of surplus production from end users. However, for this to happen, both the physical grid and the architecture of the electricity distribution system need to be improved.
With the blackout, reality has once again surpassed fiction. While countless doubts still remain, one thing is certain: electricity system reform has to quickly move beyond the realms of political debate to build an urgent, immediate plan of action.
Carlos Gutiérrez Hita, Profesor titular de Universidad. Economía industrial (transporte, energía, telecomunicaciones), Universidad Miguel Hernández
This article is republished from The Conversation under a Creative Commons license. Read the original article.
