Electricity breaks record despite cap due to gas rebound

Combined cycle plant. / CR

The average price rises another 4% this Tuesday to 270 euros/MWh with the combined cycles at full capacity and the gas price pointing to maximums due to the tension with Russia

Jose Maria Waiter

Not a session of the recently released Iberian exception with its corresponding shock. This has happened almost every day since the mechanism that limits the price of gas was put into operation. For this Tuesday, and despite this cap, the cost of electricity rises 4.6% and is above 270 euros/MWh. This is the highest price in the last week and one of the highest since last March, in the midst of the worst moment of the crisis after the war in Ukraine.

The need to compensate the companies that own the gas combined cycles with a price that continues to skyrocket explains this upward trend. The international market is again stressed by the sudden cuts from Russia to Eastern European countries, as well as by the problems generated in one of the large US gas plants on the east coast, which served as a starting point to transport it in methane tankers to Europe. The confluence of all these circumstances makes it necessary to make an adjustment of 122 euros/MWh for this Tuesday only to pay the gas compensation; figure that joins the 148 euros/MWh in which the electricity price has been set in the daily 'pool'.

The more than 270 euros/MWh represent another jug ​​of cold water for consumers in the regulated market, the first ones who were expecting a substantial reduction in their bills in the next month, with the beginning of the Iberian cap on gas. For now, the average price of electricity for the first six days with the system in operation is around 240 euros/MWh, above the 187 euros in which it closed in May or the 191 euros in April, although lower than the record of 283 euros in March.

In the absence of the 'Iberian exception' mechanism, the price of electricity in Spain would have been an average of around 286 euros/MWh, which is around 16 euros/MWh more than with the compensation for clients of the regulated tariff, which They will thus pay around 5.6% less on average.

For this Monday, the average price of electricity for regulated rate customers linked to the wholesale market had already risen 45.6% compared to this Sunday, to 258.68 euros/MWh. This increase comes after two consecutive days of declines coinciding with the drop in demand over the weekend and with the end of the heat wave.

The Iberian mechanism, which finally received the green light from Brussels last week, limits the price of gas for electricity generation to an average of 48.8 euros per MWh over a twelve-month period, thus covering the coming winter, a period in which which energy prices are more expensive.

Specifically, the 'Iberian exception' sets a path for natural gas for electricity generation at a price of 40 euros/MWh in the initial six months, and subsequently, a monthly increase of five euros/MWh until the end of the measure .

The Government limited in its calculations to 15.3% the reduction in the receipt for the average electricity consumer covered by the PVPC regulated rate during the 12 months of application of the approved cap on the generation of electricity from natural gas.

France's demand soared

However, the first results are not giving the estimated records for now. From the Association of Electric Power Companies (Aelec), where the large companies in the sector are integrated, they admit the "complexity" that exists when calculating whether the cap on gas is going to achieve that objective of the Government of reducing the amount of the invoice between 15% and 20% one year ahead. "We will have to see its evolution in the coming weeks," said the association's director of regulation, Pedro González.

From Aelec they point out some of the distortions that the mechanism is causing. Especially in relation to the demand for light that France demands. Exports to that country from Spain have skyrocketed to maximum levels since the entry into force of the Iberian leave of absence, the mechanism to cap the price of natural gas for electricity and lower the electricity bill, which reduces the effect of the measure by raising the price of electricity in Spain.

González has predicted that these electricity exchanges will skyrocket to a maximum of about 25 terawatt hours (TWh) per year, approximately 10% of the demand in Spain, thus quintupling the 5-6 TWh to which it amounted.

The organization maintains that the offer of a lower electricity price from Spain causes the export balance with France to rise to those maximum levels, despite the fact that French consumers do not pay compensation to combined cycles for the measure, which falls on Iberian consumers who benefit from the mechanism.

And they anticipate that only as the free market contracts are renewed, when they expire, the compensation to be paid to the gas companies for that cap will be distributed among more consumers compared to those who now support that adjustment, who are those who have a contract regulated (PVPC) or linked to the daily 'pool'.

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