July 29, 2021

Is it the most expensive electricity in Spain?




The light price returns to record a historical record in the wholesale market: 106.57 euros per megawatt hour (MWh) as average price. During the last day of July 20, it had already reached its annual record and the second most expensive in history, exceeding the level of 101 euros per MWh. This new rise represents a 4.6% increase with respect to Tuesday. And the worst thing is that the forecasts throughout the day do not exactly point to a decline. The price could increase up to 110 euros (MVh), while the minimum will be 100.83 euros (MVh).

This rise also coincides with the increased energy expenditure derived from the use of electrical appliances necessary to cope with the high temperatures that are being registered in various parts of the Spanish territory.

Currently, the average for this month of July is 92 euros, which represents an increase in 166% Compared to the same month last year, the average price was 34.63 euros.

Since the new electricity bill model came into force on June 1, prices in Spain have not stopped rising. This system, which applies three time slots with different prices, has been criticized by the Organization of Consumers and Users (OCU) and Facua, for punishing the small consumer, especially the most vulnerable households.

However, the truth is that the high prices of electricity in our country are not a circumstantial fact. According to data from Eurostat, in the second half of 2020, Spain was below the European average in terms of the price of electricity, of 0.1260 euros per kilowatt hour (KWh), not including taxes and levies.

However, one of the debates in our country regarding the electricity bill is the high taxation of electricity in Spain. Until last June 24, the VAT that was applied to electricity was of twenty-one %. However, the Government of Pedro Sánchez approved a decree law that reduced it to 10% and suspended the 7% tax on electricity generation for the next three months. The measure will affect those customers with a contracted power of up to 10kV and provided that the average monthly price of the wholesale market exceeds the 45 euros (MHh).

It should be noted that for now this drop has not yet obtained results. According to data from Facua-Consumidores en Acción, during the first fortnight of July the electricity bill of an average user in Spain has become more expensive compared to the same month of 2020 in a 34.6%.

The different causes of the rise

This general increase in electricity prices is due in large part to the
strong increase in the international price of natural gas and the CO2 market
, which have doubled prices in the last year. The impact of this rise is direct, both in the Spanish wholesale market As in the majority of European countries, since the power plants that use gas are the most expensive, they enter the system when demand increases and set the price of the day to the rest of the technologies, much cheaper, such as nuclear and renewables.

The Minister for the Ecological Transition, Teresa Ribera, has wanted to pronounce on the reasons that have triggered this rise in electricity prices and has alluded to the shortage of raw materials at the international level. In fact, he has highlighted that Russia “has closed the natural gas tap”, which further stresses the market.

On the other hand, it has recognized that, after the reform of the electricity market and the electricity tariff, there are very cheap prices much of the electricity and a small part of the electricity with a very expensive price, which is what marks the retribution for all.

To all this you have to add to it the general rise in temperatures, which increases the demand just at the moment when wind farms produce less energy.

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