The price of gas anticipates another surge in electricity for tomorrow, though the government insists it would be even more expensive without the cap
The price increase experienced by the increase in electricity on the first day of application of the Iberian exception is already having an impact on the organizations monitoring the Spanish energy market. The National Markets and Competition Commission (CNMC) is overseeing the proper application of the new mechanism after the final price of electricity fell by just 6% compared to the government’s initial forecasts.
Organization sources confirm to this paper this particular vigilance of a market defined by the major electricity companies, which control electricity generation in all its extremes (combined cycles, hydro, nuclear, wind and solar). OMIE, the electricity market operator where the pool prices are determined on a daily basis, is also doing it.
This morning, the vice president and minister for the ecological transition urged the Iberian mechanism that limits the price of gas “not to burn in advance” because the price of electricity in the wholesale market has not fallen as much as expected, I expected . He also stressed that the price of electricity depends not only on regulations, but also on the price of gas in international markets, temperatures and demand, which are currently very high due to the heat wave.
For this Wednesday, gas prices are already anticipating foreseeable new increases in electricity. The cost of this raw material to be compensated will be more than 97 euros/MWh, 17 euros more than yesterday’s 80. With the ceiling of 40 euros/MWh, the extra adjustment will be almost 60 euros more compared to the price set by the electricity market. With the combined cycles in record production due to the heat wave, electricity costs for this Thursday are expected to be even higher.
On the first day of the application of the Iberian exception, consumers received an unpleasant surprise: the final costs that they will pay on this first day of the gas cap for electricity have been influenced by the perfect storm of factors that ultimately failed to lowered the price to the level the government had expected. The daily ‘pool’ for this Wednesday has been reduced to 164 euros/MWh, 23% compared to the market price on Tuesday. But the obligation to add adjustments to that price to compensate companies generating electricity with gas combined cycles at the true cost of this commodity has outperformed all projections. The total cost for this Wednesday is above EUR 224/MWh, 10 EUR/MWh higher than the EUR 214/MWh of Tuesday, when the ceiling was not yet applicable.
The explanation has that. And from now on, it will be every day for the next twelve months. Let’s see: the daily electricity auction ended with an average electricity price for this Wednesday of 164 euros/MWh, almost 50 euros less than Tuesday. There the cap on gas has come into effect: a price limit of 40 euros/MWh compared to the 80 euros/MWh that this raw material costs today.
However, to this reference it is necessary to add the fee that all consumers – the first, that of the regulated market – have to pay to the companies that use gas to produce electricity in combined cycle installations. And that cost was set this Wednesday at 59 euros/MWh. Every day this reference will change depending on the situation on the electricity market.
From Ecological Transition, they admit that just this Tuesday, the accumulation of circumstances that have come together has not made it possible to visualize the advantages of the fuel cap. And they point out that it would be necessary to know what the final price would have been without that limitation, calculated at around EUR 240/MWh. That is, their estimates consider that at the premiere of the ‘Iberian exception’ it has been possible with everything to reduce by about 16 euros/MWh.
But what is that perfect storm? On the one hand, the high heat wave that most of the Iberian Peninsula is experiencing today, with temperature extremes exceeding 40º in many regions and which have increased demand to almost 40,000 Mw due to the activation of air conditioners and other refrigerators. In this context, the gas-fired power plants have been commissioned to meet all this demand and account for 31% of the total electricity production. Far ahead of nuclear (18%) – one of its plants is being shut down -, wind (17%), hydro (14.5%) and solar (12%), according to Red Eléctrica. “It’s hard to imagine a worse day for the premiere,” Executive sources say.
From this Wednesday, it will be necessary to analyze the evolution of both the daily ‘pool’ and the necessary adjustment – a daily amount will also be fixed – in order to determine the electricity price paid by consumers on the regulated market.
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.
