Spain’s energy-intensive industry is losing competitiveness due to high electricity prices and a regulatory framework that does not facilitate long-term energy contracting. This was the warning issued by Pedro González, Managing Director of the Spanish Association of Energy-Intensive Companies (AEGE), who called for urgent reforms to stop the decline in industrial demand and prevent further deindustrialisation of the country. “We are facing an unsustainable situation: if energy remains expensive, the industry will continue to decline and Spain will lose competitiveness,” states González.
The message was delivered at FES Iberia 2025, one of the key gatherings for the energy sector, which brought together executives, developers, government authorities and industry leaders in Spain to discuss energy transition, PPAs, and emerging demand segments such as data centres. During Panel 7, titled “Boosting Demand and New Opportunities”, the focus was on the relationship between energy supply and demand and how current regulations are affecting sector growth.
In this context, González shared a striking figure: industrial energy demand has dropped by 23% over the past five years. “That means one in every four products that used to be manufactured in this country is no longer being produced,” he warns.
High prices and regulatory barriers to PPAs
According to González, soaring electricity prices are the primary cause of this decline. “It’s a basic economic law: when prices rise, demand falls,” says the AEGE director. According to AEGE’s data, current electricity prices are far above the historical average. “In the last 12 months, there have been five months where prices exceeded 100 euros per megawatt-hour, and only two months where prices slightly dipped below 50 euros. From 1998 to 2019, the average price was around 50 euros per megawatt-hour,” he explains.
“This will be the fourth most expensive year for electricity since the Spanish power market was created in 1998,” González points out, emphasising the severity of the situation for Spain’s energy-intensive industry.
In addition to pricing issues, the AEGE director highlights structural challenges, such as access to long-term power purchase agreements (PPAs). “All AEGE member industries have PPAs, but they face regulatory barriers that make optimising them difficult,” he explains.
Currently, Spanish regulation prevents companies from having more than one supplier per consumption point, which complicates the combination of renewable long-term contracts with other energy supply contracts. “We’ve been asking for this regulatory change for two years. We are told it’s in the pipeline, but we’re still waiting,” González says.
Electricity market reform and AEGE’s proposals
Another problem affecting PPAs is the market design itself, which mixes short-term price signals with long-term contracts. “I sign a 10-year contract, but then I have to pay daily balancing and adjustment services that distort the final price. In some months, these extra costs reach 20 or 30 euros per megawatt-hour,” González explains. “This does not encourage long-term contracting and generates uncertainty,” he adds.
Many industrial players, faced with economic instability, are reluctant to commit to long-term deals. “We are living through successive crises: the pandemic, the war in Ukraine, supply chain problems, tariffs. It’s difficult to commit to a 10-year contract if you don’t know how much you’ll be selling next year,” González remarks.
AEGE proposes creating long-term contracting platforms fully decoupled from the spot market, meaning that renewable energy prices would no longer fluctuate with daily market prices. “As long as renewable PPAs are linked to expected market prices plus additional guarantees, industrial players prefer to stay in the spot market, even with the risks, because it avoids these extra costs,” he explains.
AEGE insists that Spain’s industrial demand could recover if conditions became more competitive. “Five years ago, we were consuming 23% more. We could return to those levels if the right framework is in place,” González proposes.
He also warns of the risk of deindustrialisation if no action is taken. “Europe is losing ground in the industrial sector because energy here is more expensive than in other industrialised countries. We are witnessing this loss at an accelerated pace,” he warns.
To reverse this trend, AEGE proposes three key actions:
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Review the fiscal burden on electricity bills, distinguishing between pro-industrial countries and those focused on tax collection.
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Reform the network and balance costs, suggesting the creation of dedicated funds to finance grid expansion without passing all the costs onto industrial consumers.
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Develop stable and competitive long-term contracts, fully disconnected from spot market volatility and with fewer regulatory barriers.
“All the industrial sector is asking for is stability, predictability, and competitiveness,” concludes González. Without these three pillars, he warns, it will be impossible to reverse the decline of Spain’s industrial energy demand.
Watch the full panel:
