Despite the Iberian cap, the generation price will exceed EUR 300/MWh, due to the rise in gas costs on world markets
The summer of energy records following the start of the war in Ukraine will shake electricity bills in August, which will be the most expensive month in electricity history. The combination of factors has resulted in the electricity generation price of the last 30 days amounting to 307 euros/MWh. Not even in March, just after the outbreak of the Russian invasion, was electricity so expensive. It was therefore on average above 283 euros/MWh. And it was already considered a milestone with widespread economic impact on families and businesses.
However, with the passing of the days in August, electricity prices have become more and more expensive. For that same Wednesday, the costs on the wholesale market will rise by 3.69% compared to this Tuesday, to 476 euros/MWh, reaching a new maximum since the Iberian exception came into effect on June 15. It is even the second highest daily price. For the time being, it is only surpassed by the record of almost EUR 545/MWh on March 7, in the midst of the crisis between Russia, the EU and the US following the invasion of Ukraine.
The average price for August is limited by the Iberian exception. Without this mechanism, the electricity price in Spain would average about 533 euros/MWh, which is about 57 euros more than with the fee for regulated tariff customers, who will therefore pay 10.7% less than average.
Electricity market prices for this Wednesday in the rest of the European countries will also be particularly high. So in the case of France it will be more than 650 euros/MWh, while in Germany it will be more than 600 euros/MWh. In Belgium they will be more than 516 euros/MWh, in the Netherlands 534 and in Austria and Switzerland almost 700 (respectively 673.28 euros/MWh and 682.47 euros/MWh).
The cost in Spain is the result of adding the average of the wholesale market auction to the fee that the demand will pay to the combined cycle plants for the application of the ‘Iberian exception’ to calculate the price of gas for electricity generation. .
In the auction, the average price of electricity on the wholesale market (the so-called ‘pool’) this Wednesday amounts to 187.3 euros/MWh. To this price of the ‘pool’ is added the compensation of 289 euros/MWh to the gas companies to be paid by consumers who are beneficiaries of the measure, consumers of the regulated tariff (PVPC) or those who, despite are on the free market, they have an indexed rate.
This spiral of high electricity prices that has occurred over the past week has been driven by the price of natural gas, which is at record levels, mainly due to Gazprom’s announcement to cut from August 31 and pump gas to Germany for three days. In this regard, French energy company Engie has reported that since Tuesday, Gazprom has reduced its gas supply, which had already fallen significantly since the start of the war in Ukraine due to disagreements between the parties over the application of some contracts.
However, the gas futures contracts on the Dutch TTF market fell by 4.8% on Tuesday, bringing the contracts below 260 euros/MWh on September.
But what is the relationship between the price of gas and electricity? More and more throughout Europe. In the case of Spain, this Tuesday, 42% of electricity production will come from combined cycle plants, which use gas to generate light. This is a very high percentage and very unusual. It is due to the low production of renewable energy (XX% of the total, due to the lack of wind).
The Iberian exception sets a path for natural gas for electricity generation at a price of EUR 40/MWh in the first six months, followed by a monthly increase of EUR 5/MWh until the end of the measure.
The government estimates that this mechanism, approved by Brussels in the spring, has saved Spanish consumers €1.383 million in its first two months of validity. This figure represents a saving of EUR 22 million per day for Spanish society since the entry into force of the mechanism.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
