US High School Economics class: Europe’s first grid crisis may not be its last

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A widespread blackout in Spain and Portugal has triggered global concern about the reliability of power grids transitioning to green energy. On May 2, 2025, roughly half of Spain’s power generation failed, disrupting hospitals, factories, transport, and communications. While the root cause is still under investigation, experts point to the instability of energy systems heavily reliant on intermittent renewable sources like wind and solar. Legacy grids designed for centralised, fossil-fuel-based generation are proving ill-equipped for the new demands of decentralised, low-carbon electricity.

Essential Question: How can countries balance the urgency of transitioning to clean energy with the need to maintain stable, reliable power systems?

Part One: Read the FT article and then answer the questions below

Europe’s first grid crisis may not be its last

Reading Questions: 

• How did the blackout in Spain directly affect people like Yosselyn Jara Sandoval, and what does this show about modern Spain’s dependence on electricity?

• What are the opportunity costs for businesses when a major blackout occurs? Give two specific examples

• Why is the shift towards renewable energy increasing pressure on electricity grids?

• What is meant by the phrase “national grids built for a different time,” and how does this relate to sunk costs in economics?

• What role does government regulation play in either helping or hindering necessary energy infrastructure investments?

• Spain’s lack of battery storage and limited ability to trade electricity with other countries made it vulnerable. What economic principle explains the benefit of being interconnected with other regions?

• Why might countries like China accept “wasted system capacity” in their electricity grids? What economic principle does this reflect?

• Why might companies like Alcoa be reluctant to operate in areas with unstable electricity? How does this relate to the idea of business incentives and investment decisions?

Joel Miller and James Redelsheimer, Foundation for Economic Education.
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