The gas collapse leaves the Iberian cap ineffective for the second day

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The cost of electricity for this Thursday is down to at least a year ago due to the contribution of renewables and the reduced need to use combined cycles

The sharp drop in natural gas prices in recent days has resulted in the Iberian cap becoming ineffective for the first time since launch. In other words, customers do not have to pay compensation to gas companies – at least today – for the difference between what the raw material costs in international markets and the limit of the Iberian mechanism (located between 40 and 50 euros/MWh).

In concrete terms, the reference price for gas-fired power stations for this Thursday is below EUR 32/MWh. This sharp drop (in August the Dutch TTF index reached more than 300 euros/MWh) is explained by the coincidence of several factors: the lower demand for electricity due to higher temperatures than usual for this time of year; a greater contribution of renewable power plants to the electricity ‘mix’ without the need to get so much out of gas plants; as well as very high conditions for filling the tanks in the face of winter. For this Thursday, 51% of the light comes from renewable energy sources (mainly wind), while the cycles represent just 23%, compared to almost 50% they contributed in the summer, according to Red Eléctrica.

Already for this Wednesday the compensation to the gas companies to be paid by the consumers who benefit from the measure, the consumers of the regulated tariff (PVPC) or those who, despite being on the free market, have an indexed tariff , it showed a negative balance, at -1.27 euro/MWh, as the mechanism exists. Sources from the Ministry for the Ecological Transition and the Demographic Challenge indicated that this gas adjustment was negative due to the low gas price in the market, leaving the reference price for gas-fired power stations at 41.49 euros per megawatt hour (MWh). very close to the reference price of 40 euros/MWh of the Iberian mechanism. So if we look at the congestion rent income from the interconnection with France, 50% of which is intended to cover the cost of the gas modification, this value is negative.

For example, the average electricity price for regulated tariff customers for Thursday will be that of the wholesale market, the so-called ‘pool’, which will amount to 86 euros/MWh, 7.7% higher than this Wednesday.

The ‘Iberian mechanism’, which came into effect on 15 June, limits the price of gas for electricity generation to an average of EUR 48.8 per MWh over a twelve-month period, covering the coming winter, a period when energy prices are more expensive.

In concrete terms, the ‘Iberian exception’ sets out a path for natural gas for electricity generation from a price of 40 euros/MWh in the first six months -until 15 December-, followed by a monthly increase of 5 euros/MWh until the end of the dimension.

Source: La Verdad

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