Electricity Prices Plunge as Scorching Heat Brings a Mixed Blessing

The massive construction of solar power plants in Spain has had an unintended consequence. A surge in electricity production has caused selling prices to plummet, to the point where plant owners must actually pay for the electricity they generate to be absorbed. This situation is a double-edged sword for the Spanish economy. Citizens now enjoy the cheapest electricity tariffs in Europe, but investors and plant owners are suffering losses and flocking to sell their assets. Based on OMIE data, the average price of electricity per kWh in Spain fell drastically from Rp 2,850 in 2022 to Rp 1,110 in 2025. From January to May 2026, the average electricity price ranged between Rp 680 and Rp 760 per kWh. In some periods during 2026, tariffs even plunged into negative territory. At negative prices, plant owners must pay transmission companies to take the electricity they produce. In the first half of 2026, the number of hours with zero or negative prices already surpassed the entire year of 2025. This means that on bright, sunny days, electricity producers are willing to pay around €5-€25 per MWh for grid companies to accept the excess supply that the market cannot absorb. This phenomenon is the fruit of Spain’s success in attracting over US$80 billion in investment in the renewable energy industry. The large-scale build-out has caused Spain’s solar power capacity to soar. When the weather is scorching, electricity production rises far above the needs of both consumers and industry. The sharp price decline has significantly squeezed profit margins. Daniel Pérez, head of the electricity company L’Energètica, acknowledged that the financial condition of plant operators continues to deteriorate. “The economic condition of the business has deteriorated so badly that investors are trying to offload their assets at quite substantial discounts,” he said. At least four large-scale solar power units have been offered for sale. However, prospective buyers are bidding at prices far below the initial investment value. The price decline for solar-generated electricity is far more extreme than for traditional power plants using steam or fuel. This is because electricity production from solar plants cannot be controlled, leading to a glut during the daytime. Without batteries, this excess energy is wasted if not absorbed. Besides requiring battery investment, the electricity grid infrastructure must also be adapted to cope with supply fluctuations dependent on weather conditions. The case in Spain provides an important lesson for other countries, including Indonesia, which is aggressively developing renewable energy. The challenge is not just about installing as many solar panels as possible, but how to manage supply so it remains stable, affordable, and profitable for businesses in the long term. The phenomenon in Spain proves that clean energy can be a source of very cheap electricity. However, careful planning is needed so that overproduction does not harm businesses and hinder future investment.