The wholesale price of electricity smashes its record due to the rise in gas: 442.54 euros/MWh

Less than two weeks after the start of the war in Ukraine, the price of the wholesale electricity market in Spain is going to pulverize an all-time high this Monday, standing, on average, at 442.54 euros per megawatt (MWh). The so-called pool is already well above the previous record of 383 euros recorded on the eve of last Christmas.

This new record comes on the first business day after last Friday the European gas benchmark, the TTF, broke the 200-euro barrier for the first time and exceeded 210 euros per MWh, after taking control by the Russian army of the largest nuclear power plant in Europe, the Ukrainian Energodar plant, in the Zaporizhia region.

By hourly sections, this Monday the historical maximum of 500 euros/MWh will be reached for the first time. It will happen from 8 to 10 in the morning and at 8 pm.

The pool is already going to mark this Sunday what until now was the second most expensive record in history, 379.03 euros/MWh, very close to the previous record in December and about 12.48 euros more expensive than on Saturday.

The prices of the 'pool' have a direct impact on the regulated rate --the so-called PVPC--, to which almost 11 million consumers in the country are covered, and serve as a reference for the other 17 million who have contracted their supply in the free market.

These high levels in the price of electricity occur in the wake of the rise in the price of natural gas as a result of Russia's invasion of Ukraine. Last Friday, S&P Global Commodity Insights warned that the "panic about the availability of supply due to the Russia-Ukraine conflict is spreading in international gas markets". Russia provides 40% of this raw material to Europe and, for now, has continued to pump gas to the EU despite the sanctions on the Vladimir Putin regime.

The electricity bill of an average user with the regulated tariff reached 131.29 euros in February, 111.5% above the 62.08 euros of the same month last year. According to Facua-Consumers in Action, this year-on-year increase was the highest to date, exceeding the 103% that rose last December and "its price also broke all records, standing at 140.62 euros". Electricity closed 2021 as the most expensive year in the historical series, with an average price of 111.93 euros/MWh due to the upward spiral registered in the pool in the second half. But the war in Ukraine has broken all those records. March already points as the most expensive month so far.

The President of the Government, Pedro Sánchez, announced last Wednesday in the Congress of Deputies the extension, until June 30, of the current tax reductions on electricity, additional discounts on the social bonus and aid for consumers industrial. Sánchez explained that the Government will extend the current tax cuts --VAT from 21% to 10%, suspension of the tax on generation from 7% and lowering the special electricity tax from 5.11% to the legal minimum of 0.5%-- until next June 30.

The temporary cut to non-gas-emitting power plants for their 'profits from heaven', approved by the Government last October, and softened weeks later to exclude from it the energy sold in long-term contracts will also be extended. The Government has been asking the EU for months to decouple electricity prices from gas prices in the face of this escalation and the European Commission is preparing a new "toolbox" for the Member States.

Likewise, Sánchez announced the extension of the discount on the electricity social bond, inviting regional and municipal governments to approve protection measures for vulnerable consumers.

The Russian invasion already led to electricity futures last week pointing to a month of March with wholesale prices in Spain still higher than those of last December, and the most pessimistic forecasts are being fulfilled.

Each increase in the price of gas implies a rise of about two euros in the price of the so-called pool, whose design Spain is demanding to change before the EU to try to deindex it from gas. The European Commission has postponed until next week the presentation of this new package of measures available to the Member States as a result of the war in Ukraine. Brussels is also finalizing a roadmap for Europe to "become independent of Russian gas as soon as possible", in the words of the European Commissioner for Energy, Kadri Simson, who no longer rules out the scenario of a cut in supply from Russia.

The Government of Spain has been asking for months for solutions to deindex the price of gas from the price of electricity and support for this emergency solution is growing. Last Wednesday, the President of the Government, Pedro Sánchez, announced the extension, until June 30, of the current tax reductions on electricity, additional discounts on the social bonus and aid for industrial consumers.