The advantages and disadvantages of Portugal and Spain being an energy 'island'

The Iberian Peninsula is considered an "energy island." This means it is poorly connected to the rest of the European electricity grid, so there are few transmission lines between the two countries and the rest of the Old Continent, especially across the Pyrenees. This offers certain advantages and disadvantages for both countries.

The Peninsula's weak connection to the rest of Europe was a great benefit when Russia cut off energy supplies after the invasion of Ukraine. This situation led to the Iberian exemption , also known as the "Iberian mechanism," a temporary measure adopted by Spain and Portugal in June 2022 to limit the price of natural gas used to generate electricity.

The main objective was to reduce the price of electricity on the wholesale market, which had skyrocketed due to the war in Ukraine and Europe's dependence on Russian gas.

The European Union allowed this mechanism precisely because of the exceptional situation of the Iberian Peninsula and its virtually nonexistent electrical interconnection with the rest of Europe. Furthermore, both nations have a wide range of renewable energy sources. The consequences of this were a drop in wholesale electricity prices compared to other European countries, which benefited the electro-intensive industry and consumers with tariffs indexed to the wholesale market.

But of course, the fact that the Peninsula is so "isolated" from the rest of the world also has significant disadvantages, such as those experienced with Monday's blackout. In the event of a serious problem of this nature, both countries are "sold out" to their fate, and, as happened in Portugal, they had to restore power using their own resources, compared to Spain, which could use energy from France and Morocco.

It's true that luck wasn't on the neighboring country's side at the time of the blackout. It was "in a period of imports," explained João Faria Conceição, Administrator of the REN. This means that, as usual, they were taking advantage of "the cheapest energy, which is that produced by Spain's solar power plants."

But, as Portuguese Prime Minister Luís Montenegro said, "even if we weren't importing energy, an event of this magnitude would still affect Portugal." For the Prime Minister, the important thing to consider in the future "is to have more developed security mechanisms to prevent an event like this from occurring, with this impact."

Portugal and Spain are interconnected by nine lines along the border that facilitate the exchange of energy between the two countries, so everything that happens on one side has repercussions on both sides.

Last summer, Maria da Graça Carvalho, Portugal's Minister of the Environment, and Teresa Ribera, Spain's Minister for Ecological Transition and Third Vice President at the time, worked together to ensure that this "energy isolation" would be included on the European Union's agenda.

Both leaders agreed to join forces and confront French opposition to electrical interconnections with Europe and express the need for this "energy island" to cross the Pyrenees to buy or sell energy to Europe. The fact that Paris is more reluctant to allow this to happen is because they are the largest electricity producers on the Old Continent thanks to their extensive network of nuclear power plants.

Both ministers worked together to ensure that the negotiations between the Iberian Peninsula and France were not bilateral, and that the European Commission would intervene in the negotiations. "We want to ask the Commission to make this a European issue," the Portuguese leader declared at the time.

Another argument put forward by both Riberas and Graça is that this energy isolation prevented Spain and Portugal from helping other European countries during the energy crisis caused by the Russian energy cutoff.

This shared grid is key to the efficient operation of the Iberian Electricity Market (MIBEL), where energy transactions that must subsequently flow between both territories are negotiated. In this context, both the Spanish Electricity Grid and the Portuguese National Electricity Grid have made significant investments over time. One of the most recent is a new interconnection between the Minho region and Galicia, linking the Beariz and Fontefría substations on the Spanish side with the Porto area in Portugal, via the infrastructure in Ponte de Lima and Vila Nova de Famalicão.