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If you have been reaching for the air conditioning remote more than usual this week, you are certainly not alone. Spain's first serious heatwave of the summer has sent electricity prices to their highest levels since March, and the timing could hardly be worse for household budgets that were already feeling the squeeze.

 

The numbers tell the story clearly. On Sunday, before the heat really took hold, the wholesale price was sitting at €56.77 per megawatt-hour (MWh). By Tuesday it had climbed to €112.42/MWh, breaking through the €100 barrier for the first time in months, before easing slightly to €95.57/MWh on Wednesday. That Wednesday figure still represents a rise of 68% in just three days. Compared to the same Tuesday the previous week, when the price stood at €98.30/MWh, the increase was 14.4%.

 

What makes this week particularly frustrating is that bills had already risen sharply in recent months, following the return of VAT on electricity to the full rate of 21% and the reinstatement of the Special Electricity Tax, changes that came into force in June. Consumer groups had already been calling on the government to bring back the reduced energy taxes introduced during the energy crisis, warning that households were under real financial pressure. 

 

The evening peak has been the sharpest point of all. On both Monday and Tuesday, prices surged to around €185.90/MWh during the after-work rush hour, precisely when millions of people arrived home, walked through the door and switched on their air conditioning at the same time.

 

The reason this happens is fairly simple. When temperatures top 40°C, as they did at more than a hundred Aemet weather stations this week, demand for cooling spikes at exactly the moment the grid is most under pressure. The warm, still air that comes with a heatwave also reduces wind generation, and extreme heat actually lowers the efficiency of solar panels, which, perhaps surprisingly, perform better in bright but cooler conditions. When renewables cannot fill the gap, more expensive gas-fired power stations have to step in, and that pushes the price up for everyone.

 

The good news, if there is any to be found, is that Spain is better protected than it used to be. The country's growing share of wind and solar means it is far less exposed to gas price volatility than a few years ago. According to the Bank of Spain, a €10/MWh rise in gas prices once translated into roughly €20 on electricity prices across major eurozone economies. Today, thanks to Spain's current energy mix, that same increase would add only between €5 and €10. It does not make the bill painless, but it does mean things could be considerably worse.

 

It is also worth remembering that even fans, which many people assume cost next to nothing to run, can add meaningfully to your bill if left on for long periods. And the air conditioning bill is really just one part of a broader pattern of summer costs that have a habit of adding up faster than most people expect. With summer barely started and the heat showing no sign of relenting, it is a good moment to think carefully about how and when you are using power at home.

 

 

Image:  Wolrider YURTSEVEN/Pexels