“Electrification, Decarbonisation, and Industrial Competitiveness” – Natalia Fabra in El País

The present and future of industry depend on energy. Energy is an essential input in any production process and, in particular, in electro-intensive sectors, where it can account for more than 50% of production costs. In addition, a well-designed energy transition can open up unique opportunities: decarbonising, improving competitiveness, and generating new industrial activities that strengthen the business fabric and employment.

Electro-intensive sectors — metallurgy, chemicals, steel, and industrial gases — are a fundamental pillar of the economy: they account for around half of the gross value added and employment in the Spanish manufacturing industry. The electricity costs they face directly affect their competitiveness and that of the downstream sectors they supply, and they impact employment, the trade balance, and inflation through their effect on final prices.

According to the Association of Energy-Intensive Companies, in 2025 the final electricity price for energy-intensive industry stands at 60 euros per MWh, 2.6 times higher than in France and 1.4 times higher than in Germany. In France, this is possible because 62% of the electricity used by large industry is purchased under the ARENH tariff on nuclear production, which sets its price at 42 euros per MWh. In addition, in France and Germany, electro-intensive consumers benefit from exemptions (from the costs of ancillary services in the electricity system) and additional compensation for indirect CO₂ costs.

The solution is not simply to add more exemptions or compensations, which ultimately must be paid for by consumers or taxpayers through electricity bills or taxes. The real challenge is to identify the true cost of electricity supply and design a market that reflects it properly, so that all consumers, including electro-intensive ones, pay what electricity actually costs — no more and no less. The problem is that, except for some specific remuneration schemes, all electricity production is paid — or has as its underlying reference — the price set in short-term electricity markets, which reflects only — and in the absence of market power — the production cost of the last plant needed. This price is, thus, unrelated to the average cost of the rest of the plants.

The energy crisis made this abundantly clear: with the spot price of gas soaring, combined-cycle plants raised their bids and drove up the remuneration of all power plants, including those that do not consume gas or that purchase it through long-term contracts at pre-crisis prices. For this reason, as Ursula von der Leyen noted in 2022, electricity companies obtained profits they would never have dreamed of. Those who financed these windfall profits were electricity consumers, hitting electro-intensive industry particularly hard, as its energy costs increased by 150% between 2019 and 2022.

The opposite phenomenon is also possible and is already being observed: in the hours when renewables set the price, it can be so low that it does not cover their investment costs, putting future investments at risk and slowing the energy transition. What may appear to be a short-term benefit for industry can become a long-term brake.

The solution to both problems requires markets that reflect the average cost of electricity supply. To that end, the public sector needs to take a more active role by organising auctions for long-term contracts for renewables and storage — a power that has not been exercised since 2021. Part of these contracts could be allocated to electro-intensive industry, which would help reduce its electricity bill and, at the same time, generate system-wide benefits for the economy as a whole.

It is also important to highlight the value of the services that the industry provides through demand management — shifting consumption to hours of lower cost and lower carbon footprint — and through active demand response, for which it is remunerated. Nevertheless, it would be advisable to reinstate automatic under-frequency load shedding mechanisms, so that the industry’s contribution to system stability in emergencies can be immediate.

Medium-term electricity prices in Spain are highly uncertain. Power futures are around 60 euros per MWh up to 2030. Still, uncertainty is total, both on the supply side (renewables deployment, energy storage, the impact of interconnections, nuclear phase-out…) and on the demand side (electrification of the economy, development of renewable hydrogen, data centres…). However, if electro-intensive industry is to remain competitive, electricity prices must be kept stable and competitive.

The same approach can be applied to industries that still depend on energy sources other than electricity, encouraging them to invest in electrification as a way to advance decarbonisation and improve competitiveness. In 2023, only 32% of industrial energy consumption corresponded to electricity; 42% was gas, and 11% oil products. This shows the wide margin that still exists to make progress on electrification, decarbonisation, and the transformation of the sector.

However, for the necessary investments to materialise, both industry and the financial sector need greater certainty about future electricity prices. An appropriate design of public support schemes, which cushions fluctuations in the cost differential relative to more polluting alternatives, can help reduce risk and, as a result, lower the cost of decarbonisation.

Industry can also find a strategic opportunity in the energy transition. The need to decarbonise the economy and electrify demand is driving the creation of new industrial sectors and strengthening value chains, with benefits for employment, strategic autonomy, and the trade balance, opening up space for Spain to position itself competitively at the international level.

But for this opportunity for industrial growth to materialise, it will be necessary to invest in innovation through an industrial policy that connects climate objectives with technological development; to strengthen vocational and university training, adapting it to the new skills required by the transition; to make strategic use of European funds; and to continue advocating for the evolution of EU electricity market rules towards a model that does not penalise competitiveness and that facilitates decarbonisation. Only if these challenges are addressed decisively can the energy transition become a true lever for economic and industrial growth in Spain.