The Government finalizes a mechanism to stop the so-called “benefits fallen from the sky” of the hydroelectric and nuclear power plants, as contained in the government agreement between the PSOE and United We Can and both formations agreed already at the end of 2018.
The Executive plans to take to the Council of Ministers, in principle next Tuesday, a draft bill to “reduce” the “over-remuneration” received by these technologies, subtracting the price of the CO2 emission rights from the wholesale market price and allocating those income to the electricity system to lower the bill for consumers and companies.
Carbon prices are at record highs and in May they have triggered the price of the so-called pool to the level of last January, during the storm Filomena. Driven by CO2 and high natural gas prices, that stock is at unusually high levels for a month of May, on the eve of the entry into force of the new electricity bill next Tuesday, which can add even more confusion among consumers.
The Ministry for Ecological Transition “hopes to start, if approved by the Council of Ministers, the processing of a preliminary draft of the Law to reduce part of the carbon dividend to non-emitting plants prior to 2005 that sell energy in the market”, explain sources from the department of Teresa Ribera.
The proposal, which would fundamentally impact nuclear and hydroelectric plants, and specifically Endesa and Iberdrola, the two main electricity companies in Spain, would not affect “any plant after 2005, nor those that have regulated remuneration, nor those that they accept auctions or any present or future investment initiative ”, explains the ministry.
The same sources indicate that the Executive is “concerned about the impact of the price of CO2 on the price of electricity and its possible consequences on the recovery of domestic and industrial economies.” A few days ago, the fourth vice president, Teresa Ribera, already advocated by “a correct incorporation of the CO2 signals without this diminishing our capacity of recovery”.
“Even when only 9% of the electricity in the market is of fossil origin”, the marginalist system of wholesale price formation for electricity that Spain has implemented “by European regulations” makes “that this extra cost, of the technology that marks the price at all times, be rewarded equally to all non-emitting infra-marginal technologies ”, adds Ecological Transition. While the plants that burn natural gas to produce electricity do face the cost of carbon, nuclear and hydroelectric they do not, and hence this overpayment.
Respect for the European framework
“For this reason, we propose proposals that respect the European regulatory framework as well as legal certainty,” says the Ribera department, recalling that a Judgment of the Court of Justice of the European Union of October 17, 2013 already validated “a very similar in force in Spain between 2006 and 2009. ”The proposal also seeks to respect“ the legitimate expectations of investors who made their investment decisions in non-emitting technologies after the entry into force of the European emission rights system (2005 ) “.
According to executive sources, the draft will be the fruit of months of negotiation between Podemos and the socialist part of the Government. It remains to be seen how much of this reduction (subtracting the price of the pool from hydroelectric and nuclear plants) would be applied to those plants that made their investment before 2005.
The Executive estimates that, with current CO2 prices (in May it has reached 55 euros due to speculation in the stock exchange that issues rights that companies have to pay for their emissions), if it is reduced by 100%, the measure it would have an impact of 1,000 million euros on electricity companies. The lower cost of the invoice would be around 5%.
At a price of 40 euros per ton, the estimated impact for companies would be 800 million. And if it goes to 100 euros per ton, as some analysts have already predicted, the figure would exceed the 2,100 million impact on companies. But those calculations start from a maximum scenario.
This draft would go to the Council of Ministers in parallel to the referral to Congress, predictably next Tuesday, of the National Fund for the Sustainability of the Electricity System (FNSEE), already as a bill, which provides for the cost of electricity premiums to the oldest renewables (7,000 million euros) and charge it to all energy marketers, including oil and gas companies.