The price of electricity rose 24% in three days, as it coincided with the extreme demand caused by the heat wave and the lack of renewable energy sources
The one called to be the rescue to muffle the increase in light has had a frustrating premiere for consumers. The Iberian exception – the system for limiting the price of gas so as to simultaneously reduce the cost of electricity – entered the market at the worst possible time: heat wave, high demand for electricity, low wind production, increased tensions through the war and… the almost extreme need to commission gas-fired combined cycle plants. Added to all these cyclical features are the flaws that the system devised by Spain and Portugal can reveal. The long-awaited cut in the bill will not be as impressive as expected, although the system has made it possible to control prices compared to other countries. Let’s see what happened for this weak premiere.
A large part of the population may not be aware of the existence of fifty power stations that produce light thanks to gas. It’s the combined cycles, back-end installations that are quickly activated when the rest of the power plants (renewable, nuclear, hydro) can’t meet all the needed demand. In these hot days, the cycles have worked like they haven’t worked in over 15 years. Last Thursday, according to Red Electrica, more than 43% of all the electricity production Spain needed was covered by these facilities. You have to go back to June 2008 to see a record of these dimensions. With hardly any wind energy (due to a lack of wind), with the photovoltaic energy sources (the high temperatures do not guarantee greater solar production) and with one nuclear power plant less in operation (Trillo, due to a technical standstill), the cycles have been the protagonists exactly the week in the week that the mechanism least wanted to take into account. Spain has about 27 GW of this technology, an installed capacity that will remain intact for the next ten years, as envisaged in the Energy and Climate Plan. It is the necessary shield to cover all electricity demand, even if it is based on gas pulling and therefore the influence of electricity prices.
The Iberian mechanism was “positive, but moderate”. It is perhaps the best definition, which has been carried out by an analysis by Fedea, about the cap on gas. The (final) prices paid these first days have been above the last cost before the Iberian exception came into effect and are up 24% in the first three days. The ‘pool’ – the daily auction – has been lower, and the limit of the gas price has been established there; but by having to add up the compensation to the electricity companies for paying gas in a lower amount than what it actually costs in the market, prices have risen. Of course they have done less than the actions supported on the same days by neighbors such as France or Italy.
The great unknown of the Iberian exceptionalism is the extent to which it will succeed in reducing the price of the electricity bill. What takes more reality every day is that the mechanism will succeed in protecting consumers from sudden surges like this week’s. But nothing guarantees that if gas prices rise or if it is necessary to use many cycles, costs will fall. What it will do is remain a little more stable than if the constraint had not existed. The Ministry of Ecological Transition initially assumed an average reduction of 30%, but will eventually be between 15% and 20% over the next 12 months. Everything will depend on the cost of gas and, essentially, on the number of consumers paying the fee. For the time being, this amount is distributed among the users of the regulated market. As free market contracts expire and renew, your contribution will be processed, which should achieve a wider spread so that it has less of an impact in every home.
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.
