Spanish Power Industry Flags "Very Worrying" H2 Outlook as Gas Prices Climb
Soaring ancillary costs and rising gas prices are darkening Spain's second-half power market outlook despite the country's renewable-heavy grid.
Spain's power sector is heading into the second half of 2026 with an unusually grim mood. Industry participants told Montel the H2 outlook was "very worrying," with ancillary costs already compressing margins for energy-intensive consumers — a warning that lands as ICE Endex TTF front-month gas traded at €42.56 on Thursday (2026-06-25), up more than 4% on the day.1
The ancillary concern is specific to how Spain's grid has evolved. As wind and solar took over more than 40% of total electricity supply, the grid has required substantially more balancing services to manage output variability. Those costs rose "brutally" in February and March (2026), market observers told Montel, and show little sign of easing into H2. Energy-intensive consumers — the players most exposed to total power bills rather than the wholesale price alone — are already pulling back on demand.1,2
That creates a paradox for how to read Spain's position within Europe. By wholesale electricity prices, Spain looks structurally cheap. Gas plants set the price in just 15% of hours in Spain so far in 2026, compared with 89% of hours across the wider European market, according to Ember. In March (2026), Spain's average power price was €59 per MWh while Italy paid €142 per MWh.3
The divergence traces directly to Spain's renewables build-out. A Bank of Spain study calculated that wholesale electricity prices in 2024 were 40% lower than they would have been if the energy mix had remained as it was in 2019. With wind and solar acting as structural deflationary forces, gas sits increasingly as a residual peaker rather than a consistent price-setter.2
But the wholesale figure does not tell the full story, and that is precisely the H2 concern. The ancillary services bill — the cost of keeping a variable-heavy grid in balance — sits atop the wholesale price and has become the swing factor for industrial buyers. If H2 brings extended calm periods that strand surplus renewables and tighten the balancing market, or if gas prices stay elevated and raise the cost of peaking capacity, that bill could climb further still.1
Spain's direct gas exposure to wholesale electricity prices is structurally limited by European standards. Gas still dispatches at the margin during evening demand peaks and during still periods for wind. TTF-indexed supply contracts also underpin a significant portion of Spain's industrial gas consumption, which means Thursday's (2026-06-25) move in the European benchmark feeds through to H2 cost calculations even if it does not reprice the average wholesale hour.
The Middle East conflict adds a tail risk that sits in the background of any H2 outlook. An energy economist told Montel on Tuesday (2026-03-31) that Italy's spot power price could quadruple to as high as EUR 600 per MWh in a two-month Hormuz closure scenario, with the mechanism running through LNG supply to southern Europe. Spain is less exposed than Italy — its Atlantic LNG access diversifies its import base — but a severe European gas shock would still reprice the peaking margin that ultimately sets Spain's intermittent price hours.4
Some market participants see the instability as an accelerant for longer-dated contracting. The current price spikes and supply uncertainty are likely to encourage power purchase agreement signings over the longer term, industry participants told Montel — a rational response to H2 uncertainty but one that takes time to manifest in near-term pricing.5
The structural argument for Spanish wholesale power staying relatively cheap holds: renewables are expanding, gas sets fewer price hours than anywhere else in Europe, and the country carries far less LNG vulnerability than Italy or Germany. But the ancillary cost trajectory heading into July, and the direction of TTF through a summer bookended by Middle East supply risk, will determine whether the industry's "very worrying" read on H2 proves to be the right call.1,2