The implementation of the mechanism will prevent electricity prices from rising further, but will not cause the government’s projected bill drop
One of the reasons for this price increase in June (10.2%, maximum in almost four decades) is the limited impact that the launch of the Iberian exceptionalism has had so far by limiting the price of gas for a lower electricity bill . The cap kicked off in the middle of the month, in an international context marked by new peaks in the gas price, which has risen by 160% this month to around EUR 130/MWh. At the end of May that was 80 euros/MWh.
These increases have resulted in a higher than expected fee to be paid to the companies required to activate the combined cycle plants to meet full demand. So far this month it has been around 92 euros/MWh on average. This amount is added daily to the result of the electricity auction, which has benefited from the ceiling, between 130 and 150 euros/MWh. But the drop has not been enough to bring down the price of a final electricity price that barely fell below EUR 200/MWh when it was moved below that reference in May.
European energy conditions were not good for the application of the ceiling in June, although the expectations for the coming weeks are not encouraging either. The energy context is characterized by threats from Russia to cut off gas supplies to Europe, a decision that mainly affects the eastern countries, which are heavily dependent on this raw material. Although reserves for the winter increase, a drastic decision by Putin could lead to restrictions. And the market is anticipating this with new price increases.
In addition, the generation will force the reactivation of some of Spain’s combined-cycle gas-fired power plants to meet all demand in an environment of scarce renewable production (the cheapest) and with high temperatures due to heat waves. According to the latest data from Red Eléctrica so far this month, 27% of the electricity consumed has come from combined cycles. This is the highest percentage these facilities have delivered for a full month in the past 15 years. In some days it is more than 42%, that is, almost half of the light consumed in the system. These figures far exceed the contribution of the gas cycles to date, which averaged 17% since the beginning of the year.
The increase in the use of these plants is not only caused by the system’s own needs (renewables only represent 40% in June, compared to 55% on average for the year; and the Trillo nuclear power plant has been paralyzed for several weeks); but also due to the increase in electricity demand from France. In fact, exports of electricity from Spain to France have peaked since the entry into force of the Iberian leave, the mechanism to limit the price of natural gas for electricity and lower the electricity bill, meaning that the effect of the measure is reduced by to increase the price of electricity in Spain, as indicated on Monday by the Association of Electric Power Companies (Aelec).
This organization points out that since the launch of the mechanism, on June 15, the interconnections with France have operated almost continuously at their maximum capacity, reaching “maximum saturation in the export direction” due to the price of the cheapest light in the Spanish electricity system customization. Aelec expects these electricity exchanges to skyrocket to a maximum of about 25 terawatt hours (TWh) per year, about 10% of Spain’s demand, quintupling the 5-6 TWh it had hitherto.
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.
