The lack of control continues in the wholesale electricity market. The average price of the so-called pool, which determines a part of the bill, will reach this Wednesday, August 11, the record figure of 113.99 euros per megawatt hour (MWh). Thus, it chains its third consecutive historical maximum and pulverizes the record of 111.88 euros / MWh registered this Tuesday.
Large Spanish companies warn of the risks due to the rise in raw materials and energy
This unprecedented succession of records comes on the eve of the first heat wave of the year, boosted by sky-high prices for CO2 emission rights and natural gas. The permits to pollute are already around 56 euros per ton and the price of gas in the Mibgas market (the reference in the Iberian Peninsula) already exceeds 46 euros in some of its products, compared to around 18 euros December, in a context of strong demand from Asia and supply problems from Russia.
However, it is hydraulics, and not combined cycle plants, the technology that is setting the price of electricity these days in most hours in the wholesale market, according to data from the Iberian Electricity Market Operator (OMIE).
The price set for this Wednesday is almost triple that of the second Wednesday in August 2020 (39.27 euros per MWh) and is 1.89% higher than the previous maximum of this same Tuesday. It is the fourth historical record that has been reached in the last month, since last July 21 the so-called pool stood at 106.57 euros per MWh, surpassing the previous maximum of January 2002.
In the first eleven days of August, the average price of the pool was 97.6 euros / MWh, compared to 35.92 euros in the same period in 2020 and 92.41 euros in July, the most recent month so far. expensive ever. Last month’s spiral already made 2021 the year with the most expensive pool in history and the average price so far in 2021 already exceeds 65 euros / MWh, compared to 60.15 euros in the same period in 2008, the most expensive year so far. Forecasts point to high prices for the remainder of the year.
The price of the pool has a weight that the National Commission of Markets and Competition (CNMC) recently estimated around 24% in the electricity bill of the more than 10 million consumers covered by the regulated rate or Voluntary Price at Small Consumer (PVPC), although that percentage has increased with the increases in recent weeks. The 17 million supplies that are on the free market are not directly affected by upward swings in the pool, but neither do they benefit when they occur downward, as happened last year.
Rise in inflation
The fact that the PVPC is directly referenced to the pool means that the transfer of increases in electricity in the European electricity markets due to the rise in emission rights and gas has been “particularly high” in Spain, according to a published study this Tuesday by the Bank of Spain that indicates that the rise in the price of electricity in the wholesale markets would explain a third of the rise in the CPI in the first half of this year. Several large Spanish companies have included alerts on your biannual accounts about rising prices of raw materials and energy.
The Bank of Spain recalls in its report that the systems that reference the domestic tariff directly to the energy price, such as Spanish and others such as Estonia or Sweden, are more volatile, but “allow consumers to internalize to a greater extent the signals provided by the prices, adapting their consumption pattern accordingly ”, save users from paying the risk premium involved in paying a fixed price and“ tend to provide the market with greater transparency and allow more efficient management of the demand”.
Despite the publicity of the electricity companies that urges them to contract their offers, all the experts and the CNMC itself recommend that domestic customers stay in the PVPC, because in the long run it is less expensive. Recently, the two main companies in the sector, Iberdrola and Endesa, they demanded changes in the semi-regulated rate to, according to Endesa, “protect” the consumer from fluctuations in the pool.
The spectacular escalation has eaten up the effect of the measures approved by the Government so far – VAT reduction from 21% to 10% on the electricity bill and temporary suspension in the third quarter of the tax on electricity generation (7%) – and The Executive has proposed to the European Commission a reform of the marginal market, which rewards all technologies at the price of the most expensive, to reduce the impact on consumers’ pockets. The other two measures that he has proposed, via a bill, to lower the bill (a fund to remove the premiums for renewables from the tariff and a mechanism to cut the extra benefits of CO2 from hydroelectric and nuclear) will take months to complete. come into force.
Review the market
“It is necessary to review the operation of a market with elaborate rules when the difference between technologies was not so great,” said the third vice president and minister for the Ecological Transition, Teresa Ribera, in an interview in the Financial Times last week. “I need a price that covers the costs but is reasonable for the consumer [pero] the European Commission considers that this is not compatible with a market with a high level of internal competition, in which the fundamental rule regarding the price is the marginal cost of the last megawatt “.
This week, the consumer association Facua called on the coalition government to “once again undertake new measures to curb speculation in the setting of electricity rates” with a decalogue of requests, including a change in the rules of the auction of the wholesale market, the reduction of VAT permanently, the control of “fraudulent offers” of the electricity companies and the approval of a new model of social bonus that represents at least a 50% discount on the invoice and which can be benefit families that earn no more than 2 minimum wages, which would increase to 3 depending on the number and characteristics of the members.
The association also demands a recovery for the State of the hydroelectric power plant concessions that expire “to integrate them into a public energy company, so that with it fair prices can be set that contribute to reducing the electricity bill.”