Spain's 2025 power cut was a regulatory failure

The Iberia power cut (Source: here)

At long last, we know with certainty what caused the Iberian blackout on 28 April 2025, which plunged all of Peninsular Spain and mainland Portugal into darkness for the better part of a day.

This means that we can also finally put to rest the endless speculation by media and interest groups, which assigned blame for the power cut on culprits ranging from the renewables sector and cyber-attacks to 'atmospheric vibrations' and weird government experiments.

The truth, it turns out, was far more mundane: Spain and Portugal lost power due to a conventional regulatory failure, underlining the old saying that the only thing worse than no regulation is bad regulation. Spain’s electricity regulatory failure is a warning worth heeding at a time of very strong momentum to deregulate everything in Western economic economies from the environment, finance, and healthcare to Artificial Intelligence (AI) and Crypto currencies.

Regulation, as we shall see, has its uses.

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Let me quickly summarise the technical reasons for the Iberian blackout. The system cut out, because fluctuations in power within the grid suddenly spiked and exceeded the system's tolerance limit. At that point, the system shut down. It took the better part of 24 hours before grid managers felt able to turn the power back on.

Fluctuations in power, or ‘oscillations’ as they are called in the electricity sector, are naturally occurring phenomena, which happen in all large systems involving frequencies. As such, they are analogous to the sudden loud and rather unpleasant 'feedback' noises that can occur in large speaker systems. They originate as tiny variations in frequency arising within individual power stations, but can morph into grid-wide fluctuations if they find resonance with frequencies in other nodes in the system.

The circumstances under which oscillations arise in conventional power plants are well understood. They are therefore normally easily controlled by grid managers, who issue commands to individual power plant operators to make adjustments that soon neutralise the oscillations.

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However, on 28 April 2025 this system failed. The Iberian black out was the result of a major failure in oscillation control, which occurred for two specific reasons.

First, the capacity of the Spanish grid system to handle oscillations was too low to begin with. Over the last few decades, Spain invested heavily in renewables, but the rapidly expanding renewables sector was never required to participate in oscillation control, which remained the exclusive domain of conventional power plants.

While exempting infant solar and wind plants from oscillation control may have been sensible by 2025 renewables were contributing a whopping 55% (150,988 GWh) of Spain's total electricity supply. While each new renewable power plant contributed to system-wide oscillation none participated in oscillation-containment.

Second, in April 2025 the already stretched capacity of Spain's dozen or so conventional power plants to control oscillations dropped even further due to a fire in one of Spain's main conventional power plants. As luck would have it, the intended replacement power plant could not be brought online for operational reasons.

These two developments inter-locked on 28 April to cause the capacity of the conventional system to control oscillations to fall below a critical threshold. The entire Spanish electricity grid immediately cut out and power supply to Portugal was shut down too.

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Technical explanations of this kind are insightful, but only get you so far in terms of preventing future occurrences. To prevent repeats, you need to look at the regulatory environment - why were these technical problems allowed to arise in the first place?

It is now clear that blame for the Iberian power cut lies squarely with the Spanish electricity regulator, which failed on two counts. First, it failed to prevent the system's oscillation controls from dropping to unsafe levels. Second, it exempted renewables plants from participating in oscillation control for far too long.

In fact, the black out was a classic case of so-called ‘regulatory capture’. The Spanish electricity regulator was too weak to stand up to the lobbying exerted by the increasingly powerful renewables sector, which staunchly opposed the sector’s participation in oscillation control. The regulator was also far too weak to stand up to the Spanish government, which itself was very strongly in favour of renewables.

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It is useful to think of the regulatory failure in Spain's electricity sector as analogous to well-known regulatory failures in many banking systems. In Spain, renewables are now as critically important to the country's overall energy supply as, say, banking is to the overall supply of credit. Banks, when left un-regulated, take excessive risks and rely on government bail-outs to cover their arses when things go wrong. In the Spanish energy sector, operators of renewables plants behaved exactly the same way: they expanded their capacities knowing full well that in so doing they would also add to system-wide oscillation risks. Still, they did not assume any of the responsibility for containing those risks.

The primary purpose of regulation is to prevent precisely this kind of moral hazard. Going forward, the Spanish government must formally recognise that the country's hugely successful renewables sector has grown up. It has become systemically important. It must therefore be regulated properly. Specifically, it must be forced to contribute to oscillation control just as conventional power plants do.

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Let me be very clear. I am hugely in favour of Spain's push for renewable power. It is laudable and visionary. It is the right thing to do and may it long continue. The key lesson here is not that renewables are bad, but rather that regulators must be on their toes, especially during periods of rapid change.

This lesson extends far beyond Spain and renewable energy. As we look across the global economic landscape, it is self-evident that Artificial Intelligence really needs regulation. Crypto also requires regulation. Like renewable energy, both these technologies have enormous upside potential, but they will only become net positive contributors to society if their many harmful facets are contained.

Yet, the entire Western world, led by the United States, is currently pushing hard for further deregulation in the hope that greater corporate freedom will somehow translate into more prosperity. This is false reasoning, however. Blanket deregulation, or regulatory capture of the kind that has happened in Spain, inflict huge costs on society.

Spain's power cut should prompt policy makers in the Western world to take a fresh look at their own regulators. The obsession with de-regulation has gone way too far. While small businesses tend to be over-regulated large businesses get away with murder due to their capacity to lobby policy makers. Continuing failures to regulate large internet monopolists, such as Amazon, Google, Apple and others, worsen inequality and push up the cost of living. Ongoing de-regulation of banks and other financial institutions are already inflating the next bubble. The de-regulation of vaccination programmes in the United States is causing measles cases to spike. Dismantlement of environment protections and measures to counter climate change are wiping out unprecedented numbers of species and raising global temperatures.

It is time to wake up. Regulation can be awful if regulators are weak or inept, but regulation is ultimately a good thing - essential even - as an instrument to address known market failures in our economies.

The End