Not surprisingly, the Congress of Deputies approved this Thursday. extending the gas cap by the end of the year with only one negative vote, 148 abstentions and 197 affirmative votes. The European Commission gave the green light in June 2022. Iberian mechanism negotiated by Spain and Portugal create a reference gas price HE prevent the spread of electricity prices. The measure began to be noticed as of Wednesday, June 15th and was expected to continue. until May 31 this year. On 28 March, however, the Spanish Government approved the extension of this measure until the end of the year, after obtaining the approval of Brussels. “The balance of the eight months is very positive and the average electricity price (in the wholesale market) is 183.4 euros per megawatt hour (MWh), well below what is observed in other European countries such as France (273 euros per MWh), Germany (240 euros per MWh) and Italy (206 Euros per MWh). 25% to 40% lower than the rest of the European Union“, defended the third vice president and minister for the Ecological Transition, Teresa Ribera. These are some of the keys to a mechanism. PNV and CKD they asked extend until the end of the year through automatic mechanism in case of emergency.
How does the mechanism work?
The so-called Iberian mechanism assumes putting a cap on the gas used to generate electricity. producing plants gas electricity (combined cycles, coal and some cogenerations) compensation with the difference between this maximum price and the real gas pricebut the consumer saves overcompensation taking the rest of the technologies (renewable and nuclear) that do not include natural gas in their costs. Compensation is paid to gas utilities all electricity consumersBesides the gas sales France, whose revenues are used to reduce this surcharge. Again, the total price of the wholesale market plus the ceiling will always be lower for any consumer What does no mechanism mean? in the context of high prices.
Why was it extended until the end of the year?
At the beginning of January, Ribera had already announced its intention to expand this mechanism to Brussels “until the war is over” or “at least until the end of 2024”. From then on, there was political and technical meetings between Spain, Portugal and the European Commission Competition Department who is leading Margrethe Vestager. At one of the meetings held at the end of January, Vestager told his interlocutors that the maximum extension period could be extended. until December 2023 Since Temporary framework of Ukrainian war support measures until that date. That’s why this is the deadline for now.
What are the new changes?
In addition extension mechanism end of may Until the end of December this yearthe previous rule is that between June and December 2022 the upper limit 40 Euros per megawatt-hour (MWh), during 5 more euros every month in January Until May, when it will end at 65 euros per MWh. extension, a new way prices of 1.1 euros per MWh per month from this April, reach that 65 euros by the end of this year.
How much will you save?
According to figures from the Ministry of Ecological Transition, since its launch on 15 June 2022, the so-called ‘Iberian exception’ by the Government has been Accumulated savings of over 5,100 million euros for consumers. This number difference Between the amount payable to electricity generators without the Iber mechanism and the amount paid with the gas cap. well, overcompensation taken up by the rest of the power plants that do not burn gas. According to an analysis conducted by ESADE business school from June 15 to December 31, 2022, regulated rate (the so-called PVPC) saved an average of 31.8%, which corresponds to around 209 euros per household and in total means: 1,880 million € for nearly 9 million customers with that ratio. And free market users? The rest of the electricity customers should also benefit from the reducing effects of this upper limit. since they use as companies reference to price your retail offerings at wholesale price, but at this point Applications of each company.
What happens if the gas price drops?
match Announcement of extension of ‘Iberian exception’ he at one time mechanism does not reach practical effects, because since mid-February gas price has been below the ceiling almost every day In March it reaches 55 euros per MWh. Third vice president and Minister of Ecological Transition, Teresa Riberarecognized before the extension is approved”If natural gas is held at current prices, the mechanism will probably not come into play.but if it raises its prices again, we can keep the electricity price low. reasonable price and not so dependent on the evolution of natural gas price”. At present, gas cost is lower 40 Euros per MWhTwice as usual before the war in Ukraine, but Far from 300 Euros who came this summer But the war in Ukraine is still going on and in a few weeks volatility returns to dominate energy markets. “The executive order I’ve submitted for ratification allows for extra guarantees for Spanish consumers to protect us against volatility,” he said at the plenary session of Congress on Thursday.
Why does the European Commission have to give permission?
The European Commission must approve Under the European Union state aid rules To prevent the deterioration of the Iberian Peninsula from adversely affecting other member states. Therefore, the government had to work hand in hand with the government. European Commission Competition Department who is driving Margrethe Vestager to find it The ideal formula that will benefit Spain and Portugal without harming the rest of the Member States. And actually, that’s why Electricity sales to France also benefit from lower prices, although they do not have to pay any compensation. The Spanish Government’s initial approach, quoted in the spring of last year, included an export price with no cap, but the European Commission rejected this extreme.
So does France also benefit from it?
That’s it. France benefits from low electricity prices in Spain. Spain achieved last year largest electricity export balance in history (19,841 million euros), almost couple Compared to other ‘good years’ in terms of sales to neighboring country such as 2008 or 2012. come back for Spain. This congestion rents is that money marketers pay for him gas exchange through electrical interconnects, in this case the tube connecting to France. Whether Spain or France is a net exporter, the resulting amount for this concept shared equally between the two countries. Normally, Spain electrical systembut it was determined that it will be used together with the creation of the gas cap. reduce the amount of adjustmenti.e. the money consumers pay make-up gas plants.