Spain asks the EU to set the price of electricity separately given the “exceptional situation” of the European electricity market

“Exceptional times require exceptional measures as a matter of urgency”, affirms the Spanish Government. The Executive arrives at an extraordinary meeting of energy ministers of the European Union in Luxembourg with a position document that insists on what Spain has been defending in recent weeks. And it does so 24 hours after Germany and the Netherlands have released another document in which they lead the opposition to the market reform requested by Spain and France.

EU leaders leave decision on energy market reforms for December

EU leaders leave decision on energy market reforms for December

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The Secretary of State for Energy, Sara Aagesen Muñoz, said upon her arrival at the meeting in Luxembourg, which was not attended by Vice President Teresa Ribera because she was in the Council of Ministers in Madrid: “The electricity market is experiencing a rise in prices due to the contagion of the gas price, which is reaching historical highs day after day. That is why Spain proposes the setting of prices separately, so that a consumer can perceive the benefits of having an increasingly renewable mix ” .

“Each increase of +1 EUR / MWh in the price of natural gas represents 2.7 billion euros a year in additional electricity costs for all European consumers, diverting resources from the energy transition and economic recovery and getting worse every day,” he says the Spanish document.

According to Spain, “this price distortion cannot be passed on to consumers, especially in times of economic recovery. European action is necessary to avoid asymmetries and ensure that Member States work in the same direction, avoiding different measures that could provoke additional distortions “. Thus, the Government affirms: “In exceptional situations, the Member States must be able to adapt the formation of the price of electricity to their specific situations (mix, resources, level of interconnections)”.

According to the Spanish document, “the marginal price affects electricity futures signals and has a high impact on inflation, reducing the effectiveness of the hedging mechanism. In these extraordinary circumstances, instead of the pure marginal price signal (polluted by spikes in gas prices), the price of electricity would be obtained as an average price with reference to the cost of ‘infra-marginal’ clean technologies (particularly renewables). The price of electricity would be directly linked to the national production mix, at the same time that it would protect consumers from excessive volatility and allow them to participate in the benefits provided by a more economical generation mix. ”

Spain also asks to establish a limit price for natural gas: “To set a limit price in the price of the offers of electricity produced by natural gas. This measure requires a subsequent compensation that will be recovered at a later stage.”

In its document, the Government notes that the current energy crisis reveals a series of market failures: neighboring gas producers do not supply gas to the market (for technical or commercial reasons), while EU gas carriers did not anticipate the supply shortage. Therefore, Spain proposes “a centralized European platform for the purchase of natural gas, facilitating the accumulation of strategic gas reserves.”

Finally, Spain asks to adopt measures to prevent financial speculation in the European CO2 markets (ETS): “The sharp increase in the price of emission rights this year is worrying, as well as the high volatility observed in the market. Increasing volatility and unpredictability of carbon prices may dampen the economic signal and ultimately reduce its effectiveness. In this context, different options should be explored, including restricting the participation of financial institutions and modifying financial institutions. circumstances that may trigger an increase in the supply of EU allowances “.


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