The electricity futures do not give up and anticipate an end of the year with record electricity prices


Electricity futures do not give up and anticipate an end of the year with record electricity prices

The energy futures anticipate a very difficult end of the year in the Spanish electricity wholesale market, which threatens to continue destroying the successive records reached this month. Electricity futures for the last quarter of 2021 in Spain have soared this week to a new record of 175.13 euros per megawatt hour (MWh), according to Omip data, above the previous record of 173.1 euros for the September 15.

That day, the average daily price of the so-called pool marked the one that up to now is its historical maximum, the 188.18 euros / MWh from last Thursday. This Wednesday, the wholesale market will rise again strongly and the daily average price will suddenly increase by 25 euros in one day to 175.87 euros, the second highest in history.

The rise is mainly explained by the continuous rises in the European markets in the price of natural gas, in a context of great concern for the winter due to the low level of storage (below 80%), strong demand from Asia and uncertainty about the supply from Russia. In the United Kingdom, this situation is putting the industry in serious difficulties, with factories shutting down and implications for the food sector due to the shortage of CO2 used by this sector.

In the case of the Iberian Mibgas gas market, gas for delivery in October shot up more than 16% on Monday, to 77.4 euros / MWh. A rebound partially offset by a certain stability in CO2 prices in recent days, with the ton in around 60 euros. For every euro that gas rises (in February it was trading at 15 euros / MWh), the wholesale price of electricity increases by about two euros, given that these plants have an efficiency of around 50%. This fuel feeds the combined power plants and determines what the rest of the technologies of the electricity generation mix charge, given that the hourly auction works under a marginalist model, in which the last power plant that matches supply and demand sets the price they charge. all.

A system that the Spanish industry has asked to eliminate and that the Government, which is asking for joint action at the European level, has proposed to modify in Brussels through a new letter sent this week to the European Commission by Vice-Presidents Teresa Ribera and Nadia Calviño. The President of the Government, Pedro Sánchez, will take the rise in the price of electricity to the summit of EU leaders next October for analysis “the causes of the current price spike“.

This Tuesday, the International Energy Agency (IEA), dependent on the club of rich countries of the OECD, affirmed that “Russia can do more to increase the availability of gas for Europe” in the face of the winter season. Gas industry executives meeting this week in Dubai assured the Bloomberg agency that in the short term “little can be done” to mitigate this energy crisis: “We hope that the beginning of winter will not be very cold in the Northern Hemisphere. Otherwise, we will be in trouble “, in the words of the executive vice president of France’s Engie, Didier Holleaux.

The 175.13 euros on average for the last three months of 2021 that light futures forecast for Spain are much higher than the slightly more than 114 euros in which the pool has traded on average since June, when this escalation started without precedents. It is assumed that for the first quarter of 2022 prices will drop somewhat in Spain, but little. Omip futures point to an average price of 162.5 euros, compared to 176.66 euros / MWh in France and 158.6 euros / MWh in Germany.

For the whole of next year, the futures point to an average price of 107 euros in Spain, compared to 75 so far in 2021. In September, the Spanish pool has always been above 130 euros / MWh and half slashes and 150 euros. This gives an idea of ​​the price level that futures anticipate for the remainder of 2021.

This situation has led the Government to approve a Royal Decree-Law for, among other measures, temporarily cut some 2,600 million to electricity companies for the so-called benefits fallen from the sky that non-emitting power plants receive (mainly hydroelectric and nuclear, but also renewables that no longer charge premiums) for the rise in gas and lower the so-called charges, the regulated part of the receipt set by the Executive, which are greater for small consumers.

In addition to putting a cap on the increases in the regulated rate of natural gas (rate of last resort or TUR) that have 1.5 million customers and launching specific auctions for large consumers, the Government has suspended the tax on electricity generation , has lowered the Electricity Tax by 90% and has lowered the VAT to 10%, among other measures, which will translate into a four-tenth reduction in inflation, according to the economic vice president, Nadia Calviño, on Tuesday. The objective is that this year, at most, the same amount that was paid in 2018 will be paid. The question is whether these measures will be enough given the prices anticipated by futures.

Asked in the Senate about whether to extend this VAT reduction beyond December, the Minister of Finance, María Jesús Montero, affirmed this Tuesday that “it will be necessary to see the impact that these measures have on the electricity bill to make the following decisions “. Montero reproached the PP for having come out “in a whirlwind” to defend the electricity companies for cutting their benefits and that they base their proposals to lower the bill on “that citizens pay it through taxes” and not companies.

The cut, according to the Aelec employers’ association, “is based on the assumption that these generation plants are selling their energy at the daily market price, so they would be benefiting from the current price escalation”, but “it will cause numerous power plants to of generation incur in significant economic losses “because they have already sold their energy to” customers who have contracted at a fixed price, so this price – lower than that set by the daily wholesale market today – is the one received by the power plants ” .

“These contracts have been formalized at prices substantially lower than the current prices of the daily market, so it does not make sense to apply a reduction justified by supposed income that they do not receive,” argues the employer.

According to Aelec, the electricity companies have sold 100% of their base production (nuclear and renewable) for 2021 and a percentage higher than 75% of that of 2022 for months, at prices much lower than the current ones. Taking Thursday’s record of € 188.18 / MWh, “according to the proposed reduction formula, each plant will see its revenues reduced by € 81.1 / MWh for each megawatt produced. But, if these plants have their production sold , for example, at a price of € 60 / MWh, they will incur losses of € -21.1 / MWh, an economically absurd and unsustainable situation, “he says.

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