OPINION | What We Have Learned — and Forgotten — from Recent Energy Crises

Ask any industrial manager today whether they would sign up to a gas price of €40/MWh for next winter. The answer is simple: no one would let it slip.

Now ask them whether they would have signed that same price in January, before the latest crisis erupted in the Middle East. The answer is no longer so obvious.

The difference lies not in the price, but in the memory. Forty euros per megawatt-hour mean nothing on their own. In 2019 they would have looked expensive. In August 2022 they would have looked like a miracle. Today they look reasonable because we compare them with much worse recent scenarios. Whether something is expensive or cheap depends on the lens (and the moment) through which it is viewed. The price is not judged against industrial cost or willingness to pay: it is judged against recent memory. And that memory shapes investment decisions.

For years we have talked about decarbonisation as if it were a race between two curves: the cost of fossil fuels, rising gradually, and the cost of renewables, falling gradually. The day they cross, the logic goes, the decision is made. Until then, we watch and wait. That image, intuitive and reassuring, is the "linearity trap" we think in — or what psychologists call exponential-growth bias. We think about energy prices the way we think about the tide: rising slowly, visible from afar, giving us time to prepare. It is a comforting image, but if we look at actual behaviour, it turns out to be three fallacies chained together.

The tide in energy markets does not rise slowly. In August 2022, the TTF multiplied fivefold in four weeks; in March it rose by €23/MWh in seven days. It is not visible from afar: the trigger can be a war that had been brewing for months but that investors had already priced out, an Asian drought combined with European storage levels running low, or the closure of a strait thousands of kilometres away. And it does not give time to react: by the time the water reaches your ankles, the industrial decision is still stuck in the spreadsheet cell where we enter the forecast energy price. The tide gives no warning, cannot be anticipated, and does not wait. Three fallacies in a row, and all of them come due on the same bill.

The price of gas in Europe depends on supply and demand levels in a global market. Qatar was not a particularly significant supplier in Spain's energy mix (7% in 2025), but the blockage of its production puts us in competition for the same resources as Asia and Oceania. Any imbalance in production or consumption disproportionately affects a European continent that today still depends on external sources for 57% of its energy needs.

When these jumps occur, prices react within weeks, or even days. Industrial decisions, by contrast, move on a different timescale. Assessing an investment, getting internal approval, securing financing, drawing up tender specifications, awarding the contract, installing the equipment and bringing it online — an electric boiler, an industrial heat pump, a solar thermal field — takes between twelve and eighteen months at best. There is an uncomfortable temporal asymmetry at the heart of the problem: the shock takes weeks to arrive; the response takes a year and a half. By the time the price spike makes the investment obviously worthwhile, it is already too late to soften the impact. Profitability appears all at once, with no room to manoeuvre.

The logic of profitability compares current cost against alternative cost and, if the crossover occurs, invests. It waits for the crossover because it believes in the crossover. Risk management logic, by contrast, identifies an exposure, assesses its impact under adverse scenarios, and decides based on expected variance, not merely average cost. The two approaches converge on the same number when the world is predictable. In a volatile market, they do not. Profitability logic is systematically wrong — and always in the same direction: it always arrives late, because it always waits for confirmation. Risk management does not wait for confirmation; it prices in the episode before it happens.

That is why the question cannot simply be when investment (in efficiency, self-sufficiency, electrification or renewable gases) will become cheaper. It is how much a shock of one hundred euros per megawatt-hour over six months would cost the bottom line, if nothing has moved yet. Industrial decarbonisation, seen this way, has stopped being a bet on the future price of fossil fuels. It is a physical hedge: a structural cover that replaces a short position in gas with reduced exposure to energy market volatility. Contractual decisions — fixed prices, hedging, forward contracts — mitigate the impact, but do not eliminate the exposure. In extreme spikes, moreover, premiums explode and financial cover is no longer available at pre-shock prices. Technological decisions, by contrast, render the price per megawatt-hour irrelevant for the energy that is simply not consumed.

It is in the cost of transition that the conversation tends to get stuck. And that is fair enough: electrifying an industrial process, installing a heat pump or rolling out new technologies requires investment, as well as permits, engineering and time. But that is only one part of the equation.

An industry that saves energy can monetise those savings today through Energy Savings Certificates. Furthermore, Europe is aligning incentives and regulation in the same direction: supporting electrification and clean technologies while progressively increasing the cost of emissions through the Emissions Trading System. What matters is not memorising the name of each instrument, but understanding its logic: they are designed for those who move first.

The asymmetry is straightforward. If the decision is taken today, incentives still exist. If it is taken once the problem is obvious to everyone, new needs appear and there is less room to act.

While we wait for that supposed perfect crossover of costs, risk keeps accumulating. And the timetable for industrial response does not speed up just because the market becomes more volatile.

That is precisely what we tend to forget every time prices settle down: energy crises are not extraordinary events that happen once in a while. They are reminders of a reality that remains there even when the market appears calm.

So the question is not whether we will face new episodes of energy tension again. Recent experience suggests we will. The question is whether we will keep analysing energy purely as a price variable, or whether we will start treating it, too, as a matter of risk exposure and industrial competitiveness.

Because waiting for the next crisis before acting is not prudence — it is assuming that the next one will be different from all those that came before.

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By Víctor Ballestín Trenado, Director of Energy Efficiency at CIRCE – Technology Centre.