Spain and Portugal offer to limit gas prices by 30 euros to make electricity cheaper

Spain and Portugal offer the European Commission a maximum price of 30 euros per megawatt-hour (MWh) for the price of gas burned by combined cycle power plants under a “Iberian Exception” mechanism agreed by the Council of Europe last week. As it goes Portuguese newspaper Publico.

“This figure, which is not confirmed by the Spanish Ministry of Environmental Transition, will work as a limit on the cost of fuel that fossil fuel power plants have, and this is a ‘normal’ price for the pre-crisis period,” the document said. Which had access. Means secondary. This value should be “internalized with marginal technologies”, the most expensive and will provide “low” prices to the wholesale market, indicates the document, which is now to be evaluated by Brussels.

This is a temporary measure to prevent the extremely high gas price pollution of the common Iberian Basin of Spain and Portugal, where there is a high penetration of renewable energy from which consumers are not fully benefiting due to the marginal market design. The proposal relates to “exceptional circumstances that cause serious economic hardship” in both countries, the document said. This Thursday, Portugal’s INE announced that inflation had reached 5.3% in March, the leading figure for 9.8% in Spain.

Spain and Portugal explain that “the adjustment mechanism will apply only to marginal technologies” and, in particular, will be applied to the Iberian electricity mix “gas combined cycle plants, coal plants and cogeneration plants”. To make the necessary adjustments, they offer to set this reference price based on the Iberian gas market, Mibgas, so that manufacturers with variable costs above this 30 EUR / MWh will be compensated for the difference between this margin and the market value for the next day. . .

At this price, the “Order of Merit” is guaranteed [la prelación con la que van entrando las distintas fuentes de generación en el llamado pool hasta que se cubre la demanda] “It will not change, because all marginal technologies will receive the same compensation,” – said in a joint proposal of the two states. According to this order, the first technologies to be introduced are the cheapest (renewable energy), which has priority over the rest, while the most expensive are introduced later, until supply and demand are balanced.

The formation scheme of this Iberian exception involves the holding of the first auction in which gas plants announce current prices and which will be a reference for French exports. In the second case, this limit will be applied, which, for example, will result in a price of 120 Euros / MWh, instead of the existing 220 Euros. The difference in gas payments will be proportional to the rest of the generation. The result, according to the Ministry of Ecological Transition, will be significant net savings for consumers, the so-called. Without the use of a tariff deficit.

The adjustment mechanism that will be used on a daily basis to compensate for the combined cycles will be the “payment obligation” shared by the market operator. [OMIE] Between all procuring entities participating in the electricity market “in proportion to the contracted energy. “The final price will be relatively lower than the marginal prices before the use of this adjustment mechanism,” added Spain and Portugal.

Number suggested by Bellara

The figure of 30 euros is the same as that proposed on Monday by Social Rights Minister Ione Bellara, who later pointed out that with the addition of issue rights, this would lead to prices around 100 euros in the wholesale market.

On Tuesday, Vice Presidents Nadia Calvino and Theresa Ribera declined to confirm the figure. “I am very surprised that someone has an opinion on this. “This is a job that is being done technically to get the numbers right,” said Calvino, who emphasized that the goal was to “set the lowest possible gas price.”

Lisbon asked for time on Monday to define its proposal, which was originally announced earlier this week, as the new Portuguese government did not take office until Wednesday afternoon. The proposal was delivered in Brussels on Wednesday night, writes the Portuguese newspaper.

Critique of electricity

Vice President Theresa Ribera is confident that this Iberian mechanism, which Madrid and Lisbon have been forced to demand with a limited relationship with France, will take effect “in three or four weeks”. He will do so after the government strengthens the so-called Control of the “benefits from heaven” in the war response plan approved this Tuesday. In this case, the maximum price, which will be taken as a reference to the selling price for the end user of non-emitting technologies, will be 67 euros per megawatt hour (MWh). This price is based on the Iberian market price (Mibgas) from the day of its creation: 20 Euros / MWh.

Electricity employer Aelec warned this Thursday that setting a price for the final bids would de facto mean trying to set a regulated price for the energy produced by the technology, leading to a “real distortion” of commercialization activity * by the retailer. .

Employers say the intervention price is “discrimination” against prices in the rest of the EU and is a “step backwards” in liberalization dictated by European regulations.