After many months, some modifications and, although at first the signs pointed to the contrary, Spain has managed to carry out its proposal for an ‘Iberian exception’ with which to be able to unlink the price of gas light. But the adjustment will not be immediate, Spain and Portugal must send their concrete proposal to the European Commission for evaluation. And it will not be until “three or four weeks” when it can be launched, as confirmed by the Third Vice President and Minister for the Ecological Transition, Theresa Riverain an interview on Spanish Television this Saturday.
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“The Commission will need a few days, a few weeks to verify that everything is correct or recommend us to introduce improvements and we calculate that in three or four weeks we will be able to have a pronouncement from the Commission on what we are proposing and make it immediately operational”, said Ribera, who has reiterated that what will be done is to “separate gas from the price formation mechanism in order to repay the gas in each hourly section of our electrical system”. The main unknown to be resolved from here is how the proposal is executed: what will be the price cap that will be put on gas, how will combined cycle power plants be compensated or if a disconnection with France is made.
One of the main keys to the measure to be adopted is what will be the maximum reference that will be put to the offers of the combined cycle plants in the electricity market. Among the references: wholesaler’s price in the last decade it has been an average of 50 euros per megawatt-hour (MWh), electricity companies have been defending for months that their long-term contract offers set prices of around €60/MWh. Furthermore, according to sources from part of the electricity companies, which cites figures from the General Directorate of Customs in December 2021, the cost of natural gas for the use of the combined cycle was 58 euros per megawatt-hour, but the gas companies, always according to these sources, sell to generators on the market internal (Mibgas) at a price of 111 euros and that is why the price goes up. On the other hand, the maximum limit that the electricity market had Until July 6, it was €180/MWh, and this was not exceeded until September 16, 2021, when, according to the Government, the gas was already internalizing a price hike result of the reduction of Russian gas orchestrated by the Russian president, Vladimir Putin, to prepare the invasion of Ukraine. The new limits of between -500 and 3,000 euros per megawatt-hour were established at the proposal of the Iberian Energy Market Operator (OMIE), after many consultations with the different agents and the assessment of the National Market Commission and the Competition (CNMC), in application of the community directive.
Another unknown is how the compensation to the combined cycle plants by the difference between price cap to which they can make their offers in the electricity market and the actual cost that this technology has, influenced by the price of natural gas in the wholesale market and the price of CO2 emission rights (which penalizes the most polluting plants). Executive sources pointed in the middle of this week in two directions: either through the General State Budgets (PGE) or through the own electrical systemlet him be the one to make the adjustment. In this case, they would be consumers those who would directly pay the difference between the reference price and the real cost through their electricity bill, but that difference would be “much lower” than the crazy price that is currently paid on the bill for electricity. For his part, the President of the Government, Pedro Sanchezinsisted upon his departure from the European Council in that this is “an exceptional, temporary measure, which does not involve subsidizing gas”. “There are not going to be public aids to the gas companies,” he added.
electrical interconnection
The main argument of the Government, which has ended up being key to obtaining the approval of Brussels for delink the price of gas from the electricity market is the low interconnection with the rest of Europe (in the European Council Conclusions the adoption of measures to reduce the price of electricity is conditioned to its “temporary nature” and to “electrical interconnection levels”). The European electricity market is, to a greater or lesser extent, interconnected. This improves the security of supply (a good example is the case of Ukraine and Moldova that have synchronized their network to Europe to avoid blackouts) and facilitates the competition of prices between countries (allows you to buy energy from the neighboring country if it is cheaper). The European Union set a goal for countries to have a 10% interconnection ratio by 2020, that is, that the capacity of interconnection represent the 10% of installed generation power in the country. In the case of Spain and France, this rate is 2.8%, which is why the Government defends considering this country an “energy island” that breaks that small link with the rest of the system. But you have to decide how does one get rid of that relationship. It could be done by banning exports to France or limiting sales, among many other options.
But before that, this Tuesday, the Minister council will approve your shock plan to face the war with special prominence for the section energetic. Among the measures, some advanced by the President of the Government, Pedro Sánchez, the day after the invasion of Ukraine –such as the extension of the extension of the discounts of the social bonus and the reduction of taxes for the electricity bill until June or the reduction of 80% of electricity tolls for the electro-intensive industry (which has a discount of 100% of the charges and, therefore, will see the supply significantly reduced). And others confirmed by Teresa Ribera in her interview in El Periódico, such as the preview of the remuneration of the oldest renewables (RECORE), close to 2,000 million euros, which will serve to reduce the fixed part of the bill, or the renewal of the social bonus so that it reaches more users.