Being aware of the evolution of electricity prices is crucial at both a personal and business level. As a result, customers can effectively manage their budgets, adopt energy efficiency measures and make informed decisions on their environmental impact.
By knowing and understanding changes in electricity prices, consumers can adjust their behaviour and strategies to minimise costs and contribute to a more responsible use of energy.
This article explains how electricity prices will evolve in 2024, comparing it to previous years and commenting on this year's forecasts.
Electricity price evolution in 2022, 2023 and 2024
Although 2022 began with electricity price increases, February saw a slight drop. From March onwards, electricity costs rose each month compared to the same month of the previous year, except for the last quarter, when cheaper rates were observed.
In 2023, electricity prices fluctuated, with a competitive close and changes in the pricing methodology. The average electricity price closed 2023 at €87.43/MWh. This represents a reduction of 58.3% compared to the previous year, where it reached €209.69/MWh.
During the first quarter of 2023, the price rose to €184/MWh2. This upward trend continued throughout the year. February 2023 recorded the highest average monthly price, reaching €200.44/MWh. On the other hand, November 2023 had the lowest average price of the whole year, at €121.14/MWh3.
As for electricity prices in 2024, experts believe that the market will stabilise in terms of price. Here are the averages recorded according to Red Eléctrica data:
| Month | Electricity price in 2022 | Electricity price in 2023 | Electricity price in 2024 |
| January | €210.09/MWh | €69.55/MWh | €63.10/MWh |
| February | €205.7/MWh | €133.47/MWh | €56.81/MWh |
| March | €294.3/MWh | €89.61/MWh | €52.46/MWh |
| April | €203.6/MWh | €73.73/MWh | |
| May | €195.8/MWh | €70/MWh | |
| June | €175.9/MWh | €78.6/MWh | |
| July | €150.1/MWh | €87.48/MWh | |
| August | €162.4/MWh | €117.25/MWh | |
| September | €141.07/MWh | €98.91/MWh | |
| October | €127.21/MWh | €104.92/MWh | |
| November | €115.56/MWh | €108.36/MWh | |
| December | €96.95/MWh | €103.50/MWh |
Why does the price of electricity increase?
Electricity prices rise for a variety of factors and reasons, starting with the effects of the pandemic after Covid-19. During the first months, supply reached the excess for the minimum energy needed by citizens and, when demand returned to pre-pandemic levels, suppliers had already slowed down their production, creating an imbalance in the market.
In addition to this, other factors influence electricity price increases, such as oil and natural gas price rises (an element that has seen an increase in demand) and the contribution of renewable energies to the product's end price.
There are other reasons why electricity costs are skyrocketing, such as rising commodity prices, increased consumer demand due to more abrupt temperature changes, or the cost of CO2 emissions that gas and coal-fired power plants pay for polluting.
Electricity price forecast for 2024
For 2024, electricity prices in Spain are expected to undergo some changes, starting with phasing out tax rebates. During 2023, the average electricity bill for households on the regulated tariff (PVPC) was €60.26 per month (€723 per year), representing a significant reduction compared to previous years.
However, this partial decrease was partly due to the tax rebates for electricity, which will disappear in 2024. If VAT and electricity tax reductions had not been applied, electricity bills in 2023 would have been €148 more expensive.
Experts focus on the factors that will influence price fluctuations in the wholesale market, such as, for example, the availability of natural gas.
Given the above, electricity prices are expected to remain between €60 and €80/MWh in the first quarter of 2024. If this trend persists in the coming months, the wholesale price is likely to remain stable.
The new regulated electricity rate in 2024
From 1 January 2024, the new calculation formula for the regulated electricity tariff – affecting around 8.5 million consumers in Spain – came into force. Unlike the previous approach, which was fully indexed to the daily wholesale market, the new formula means that the electricity price will be calculated using 25% of the future price and 75% of the daily price. As we move towards 2026, the weighting of the forward price will be gradually increased.
Electricity prices in Europe in 2024
Over the last decade, electricity prices in Spain have been above the European average. However, after a significant increase in 2022 and the implementation of the Iberian derogation policy, Spain managed to bring its prices below the European average.
In 2024, and within the European Union, the transition to renewable energy sources is expected to remain a determining factor in price developments, with an increase in electricity generation from sources such as solar and wind.
Volatility in energy markets will remain a challenge, as factors such as supply and demand, natural gas prices, weather conditions and changes in energy policies can have a significant impact on electricity prices. In addition, unforeseen events such as geopolitical crises or natural disasters can cause prices to fluctuate sharply.
Technological advances and investments in electricity infrastructures are expected to play a key role in stabilising prices and improving energy efficiency. Energy sector digitalisation, the development of smart grids and energy storage will be important aspects to take into account to guarantee a secure and sustainable electricity supply at competitive prices.
Governments, businesses and consumers must work together to promote policies that encourage energy source diversification, carbon reduction and cost optimisation for end-users.
With strategic planning and a long-term vision, a more stable, resilient and sustainable European electricity market can be built.
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