Competition monitors the Iberian exception to the rise in electricity prices

The price of gas anticipates a new rise in electricity for tomorrow, although the Government insists that without the cap it would be even more expensive

Jose Maria Waiter

The rise in prices experienced by the rise in electricity on the first day of application of the Iberian exception already has a consequence among the organizations that monitor the Spanish energy market. The National Commission of Markets and Competition (CNMC) is supervising the correct application of the new mechanism after the final price of electricity barely fell 6% compared to the initial forecasts of the Government.

Sources from the organization confirm to this newspaper this special vigilance of a market conditioned by the large electricity companies, which control the generation of electricity in all its extremes (combined cycles, hydroelectric, nuclear, wind and solar). OMIE, the electricity market operator where pool prices are set daily, is also doing it.

Already yesterday, the vice president and minister for the Ecological Transition, Teresa Ribera, indicated that in the absence of the mechanism "prices in Spain would have risen to around 240 euros/MWh, which shows its effectiveness in reducing the price of electricity, limit windfall profits of electricity companies and function as a 'firewall' against high gas prices'.

For this Wednesday, gas prices already anticipate foreseeable new rises 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 cap set at 40 euros/MWh, the additional adjustment will be almost 60 euros more with respect to the price set by the electricity market. With the combined cycles in record production due to the heat wave, the cost of electricity is expected to be even higher for this Thursday.

On the first day of the application of the Iberian exception, consumers got an unpleasant surprise: the final cost that they will pay for electricity on this first day of the gas cap has been affected by the perfect storm of factors that ultimately have not managed to cut the price to the level that the Government expected. The daily 'pool' has been reduced for this Wednesday to 164 euros/MWh, 23% compared to the market price on Tuesday. But the obligation to add adjustments to that price to compensate companies that generate electricity with gas combined cycles against the real cost of this raw material has exceeded all forecasts. The total cost exceeds 224 euros/MWh for this Wednesday, 10 euros/MWh higher than the 214 euros/MWh on Tuesday, when the cap was not yet applied.

The explanation has its that. And from now on it will be like this 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 on Tuesday. There the cap on gas has taken 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 compensation that all consumers -the first, those of the regulated market- have to make to the companies that use gas to produce electricity in combined cycle plants. And that cost has been set this Wednesday at 59 euros/Mwh. Every day this reference will change depending on the situation of the electricity market.

From Ecological Transition they admit that, just this Tuesday, the accumulation of circumstances that have come together have not made it possible to visualize the benefits of the gas 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 240 euros/MWh. That is to say, their estimates consider that with everything it has been possible to reduce by about 16 euros/MWh in the premiere of the 'Iberian exception'.

But what is that perfect storm? On the one hand, the high heat wave that most of the Iberian Peninsula is experiencing these days, with extreme temperatures that exceed 40º in many regions and that have increased demand to almost 40,000 Mw due to the activation of air conditioners and other refrigerators. In this context, the gas combined cycle power plants have burst in due to the need to cover all this demand and have come to represent 31% of all electricity production. Far ahead of nuclear (18%) -one of its plants is stopped-, wind (17%), hydroelectric (14.5%) and solar (12%), according to Red Eléctrica. “It is difficult to imagine a worse day for the premiere,” say sources from the Executive.

As of 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 established- to determine the price of electricity paid by consumers in the regulated market.

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