ECONOMICS · MARKETS · Capital
Energy & Industrial Economics
Why Does Italy Pay More for Electricity Than Spain?
In the first half of 2026, comparable Italian households paid 6.33 euro cents more per kilowatt-hour than Spanish households. The surprising result is where the gap sits: 91% lies in the bill before taxes. For a defined business category, however, non-recoverable levies matter substantially more. We examine what this decomposition proves, why gas-sensitive wholesale markets offer a plausible explanation, and what the evidence cannot yet attribute to any single cause.
Rokin Research
Key takeaways
The transition’s investable bottlenecks are increasingly physical: connection queues, grid equipment, permitting capacity, and skilled delivery.
1. In H1 2026, 5.74 of the 6.33 euro cents/kWh household gap lay before taxes and levies (about 91%). 2. For 500–1,999 MWh/year businesses, the net-of-recoverables gap was 9.17 cents/kWh; non-recoverable tax differences contributed 3.33 cents. 3. Gas-sensitive price-setting is a credible wholesale mechanism, but the observed retail premium cannot be causally allocated to gas using these data alone.
The €222 difference hiding in an electricity tariff
For a household using 3,500 kilowatt-hours a year, the difference between Italy's and Spain's published electricity prices in the first half of 2026 translates into roughly €222 over a hypothetical year. That is not the measured excess bill of every Italian home. It is a like-for-like calculation using Eurostat's prices for households consuming between 2,500 and 4,999 kWh annually. At those rates, Italy's average was 31.42 euro cents/kWh and Spain's 25.09 cents. [1]
Italy is not Europe's most expensive electricity market. But a comparison with Spain is revealing because the countries share the euro and participate in European electricity trading while relying on different generating fleets and facing different national charges. It lets us ask a more useful question than whether bills feel high: where does the observed price difference actually appear?
The gap is not primarily a difference in household taxes
The total Italy–Spain household gap was 6.33 cents/kWh in the first half of 2026. Removing all taxes and levies from both published prices leaves 23.56 cents/kWh in Italy and 17.82 cents in Spain, a difference of 5.74 cents. The difference in the tax-and-levy residuals is just 0.59 cents. [1]
This is an accounting identity, not an econometric estimate. Roughly 91% of the observed household gap sits in the pre-tax price and about 9% in the difference between taxes and levies. The pre-tax price includes both energy and supply costs and network charges. It would be incorrect to call all 5.74 cents a wholesale-energy difference, let alone the amount caused by natural gas.
The history matters. In the second half of 2024, taxes and levies explained roughly half the household difference. By the second half of 2025, the Spanish tax residual exceeded the Italian residual, partly offsetting an Italian pre-tax premium. In the first half of 2026, the tax contribution was positive but small again. The result is not that taxation never matters. It is that the current household premium cannot mainly be explained by the difference in reported tax burdens. [1]
Why the underlying electricity markets are different
There is a credible economic mechanism behind the pre-tax difference. Gas-fired power stations can set the clearing price even when they provide a minority of total electricity. That is because the market price depends on the marginal unit needed to satisfy demand, not just the average cost of every generator in operation.
The European Central Bank's September 2026 research finds that gas remains a frequent price-setting reference in Italy, whereas the share of Spanish hours classified as gas-price-setting has declined with rising renewable generation. Its classification is a model-based indicator using gas, emissions and electricity prices, not a direct count of physical dispatch decisions. [2]
The generation figures are consistent with differing exposure. Italy reported 126.9 TWh of natural-gas electricity generation in 2025. Spain reported that renewables supplied 55.5% of national electricity generation that year. These quantities use different denominators and should not be subtracted as if they were comparable fuel shares. They do show the systems' different structures. [3][4]
Wholesale exchange benchmarks point in the same direction: Italy's corrected 2025 PUN Index GME averaged €115.94/MWh and Spain's OMIE day-ahead market averaged €65.29/MWh. But the two series use different averaging conventions, and both describe 2025 wholesale markets, not the first-half 2026 retail bill. They are corroborating market context, not an estimate of how much of the household gap gas caused. [5][6]
That missing causal bridge is important. A retail price also reflects forward contracts, supplier costs, network charges, regulatory interventions and the timing of wholesale-price pass-through. A long-term tariff might barely change in response to one month of cheap renewable power. An independent breakdown of the 2026 pre-tax difference into procurement, networks and supply margins would require further comparable component data. [2][7]
The business result is different
For non-household consumers using 500–1,999 MWh a year, Eurostat reports a different cross-country pattern in the first half of 2026. Prices excluding VAT and other recoverable taxes or levies were 22.53 cents/kWh in Italy and 13.36 cents in Spain. That is a 9.17-cent premium, equivalent to €91,700 per hypothetical 1 GWh of annual consumption. This is a comparator at published rates, not a claim that a company could relocate and capture that entire amount. [8]
Of those 9.17 cents, 5.84 cents lies in the price before all taxes and levies, while 3.33 cents reflects the difference in remaining non-recoverable charges. So the pre-tax component explains about 64% of this business gap, compared with 91% for the selected household band. The share is different because the customer categories and the appropriate tax basis are different.
This distinction matters for industrial competitiveness. Electricity-intensive manufacturers need to consider energy-market exposure and the structure of the bill they actually bear. Lower wholesale prices are valuable, but so can the treatment of non-recoverable charges, network access and long-term procurement. Which factor a particular firm can change depends on its consumption profile and contracts.
What the comparison implies, and what it does not
For households, eliminating only the difference between Italian and Spanish tax residuals would mechanically close less than one-tenth of the latest observed gap, holding all other billed prices constant. For the specified business band, non-recoverable charges account for a more substantial portion of the observed net-price premium. Neither observation establishes the fiscal cost or market response to changing a tax or levy.
More renewable production and better grid connections could reduce the frequency with which expensive gas sets electricity prices. Yet those investments have costs and can also change congestion, balancing needs and network tariffs. It would be equally careless to promise that copying Spain's generation mix would produce Spain's household electricity bill.
The strongest conclusion is narrower and more actionable: Italy's electricity disadvantage is not one number with one cause. In early 2026, household prices were mainly separated before taxes; medium-sized non-household prices also differed materially in charges that businesses may be unable to recover. Italy's gas-sensitive power system helps explain why underlying market costs deserve attention, but the exact causal allocation remains unmeasured.
That is the distinction policymakers, energy buyers and investors need to keep: a bill decomposition can identify where a problem resides. A claim about which investment or reform will remove it requires a separate counterfactual.
Research note: Findings use Eurostat half-yearly country averages for specified consumption bands, not an individual tariff, household survey or matched industrial-site sample. Figures are nominal and observed for 2026-S1 unless marked otherwise. The 2025 wholesale and generation evidence is contextual. The accompanying technical report and workbook contain the seven-half-year household series, calculation identities, business tax-basis bridge and non-causal sensitivities.
Sources
[1] Eurostat, nrg_pc_204, household electricity prices, band DC, 2023-S1 to 2026-S1, including and excluding taxes: https://ec.europa.eu/eurostat/databrowser/product/view/nrg_pc_204.
[2] ECB, The uneven journey of wholesale gas and electricity prices to consumer bills, Economic Bulletin 6/2026: https://www.ecb.europa.eu/press/economic-bulletin/focus/2026/html/ecb.ebbox202606_04~5f026ee8e2.en.html.
[3] Terna / Sistan, Italian electricity statistics 2025: https://www.sistan.it/news/prodotto/dati-statistici-sullenergia-elettrica-italia-2.
[4] Red Eléctrica, The Spanish Electricity System in 2025: https://www.ree.es/en/press-office/news/press-release/2026/03/the-spanish-electricity-system-in-2025-electricity-demand-generation-and-installed-power-capacity-increase.
[5] GME, corrected 2025 PUN Index GME average, 4 March 2026: https://gme.mercatoelettrico.org/en-us/Home/NoticesandAnnouncements/NoticesandAnnouncementsME?id=7408.
[6] OMIE, Main results of the electricity market 2025: https://www.omie.es/sites/default/files/2026-01/omie_resultados_mercado_2025_en.pdf.
[7] ECB, Drivers of electricity prices across households and energy-intensive industries, 1/2026: https://www.ecb.europa.eu/press/economic-bulletin/focus/2026/html/ecb.ebbox202601_02~a552b71378.en.html.
[8] Eurostat, nrg_pc_205, non-household electricity prices, band IC, 2026-S1: https://ec.europa.eu/eurostat/databrowser/product/view/nrg_pc_205