Electricity Market Update: Prices Decline, Government Measures Grow

The wholesale electricity price is set to fall again this Thursday, dipping by 10.1% versus the previous Thursday and staying below 200 euros per megawatt hour (MWh). This marks the third straight day of decline in the market.

Data cited by the Iberian Energy Market Operator (OMIE) and compiled by Europa Press show that today’s Good Friday pool price stands at €198.47/MWh, down from yesterday’s €220.76/MWh by €22.29. The market’s fluctuations continue to shape household bills and market expectations.

Forecasts indicate the day’s peak price will reach €237.29/MWh between 21:00 and 22:00, while the lowest point of €151.11/MWh is projected for 15:00–16:00.

When comparing to the same date last year, this Thursday’s pool price is markedly higher, reflecting a year-over-year rise of about 191.05% since April 15, 2021, when the price was €68.19/MWh.

Pool prices directly influence the regulated tariff, known as PVPC, which covers roughly 11 million households in the country and sets a benchmark for the remaining 17 million contracts in the open market.

Statistics from the National Markets and Competition Commission (CNMC) indicate that in 2021 around 1.25 million people switched from PVPC to a fixed-price free market rate as part of the broader trend of rising energy costs.

The best way to save on electricity bills without sacrificing comfort

On March 29, the government unveiled a national plan to mitigate the war’s effects, including extending the tax relief on electricity bills through June 30 and widening the social electricity bond to reach up to 1.9 million beneficiary households.

Additionally, an early and extraordinary update of the regulated fee regime for renewable energy, cogeneration and waste (Recore) was adopted, featuring a €1.8 billion reduction in electricity bill fees.

Another measure extended the gas discount through June 30 to curb extraordinary profits in the electricity market, expanding coverage to futures and fixed-price contracts whenever the price exceeds €67/MWh.

Spain and Portugal also advanced a preliminary proposal to the European Commission to set a gas reference price of €30/MWh to help lower electricity costs.

Why separating electricity and gas prices matters

Electricity price calculators allow users to see the per-kWh cost by selecting any device in the tool, making it easy to understand how consumption affects bills.

Stability since the spike

When the war in Ukraine began on February 24, wholesale prices stood at €205.6/MWh. A rapid rise followed, with a peak on March 8 reaching €544.98/MWh, a record high.

Since mid-March, prices have hovered around €250/MWh but have gradually declined in recent days, falling below €230/MWh.

March set as the most expensive month in history

From the onset of the crisis on February 24, the market saw a dramatic rise that culminated in a record. The March average reached around €283.30/MWh, with a mid-month spike pushing the monthly figure well above levels seen in late 2021.

Understanding the new electricity tariff

Wholesalers influence the PVPC, the tariff used by roughly 11 million consumers and serving as a benchmark for the 17 million who buy on the free market. The Ukraine-Russia conflict could push energy prices higher in the weeks ahead, particularly for gas, as European imports face potential slowdowns due to sanctions.

To cushion the impact on households, the government extended the electricity bill tax relief through June 30. The rise in European energy costs is driven by global market dynamics and the higher price of gas used in most power plants, along with carbon dioxide (CO2) emission rights.

Saving more than €500 per year on electricity bills

Measures to ease consumer costs include extending the tax relief on electricity bills for the first four months. The broader energy price rise continues to be influenced by international market tensions and gas price movements, compounded by CO2 emission rights.

The ongoing conflict in the region raises the possibility of higher energy costs in the near term, especially for gas, as European imports face renewed pressures from sanctions and supply constraints.

2021: a record year for electricity pricing

The year closed with significant price volatility, driven by the pool’s upward trend in the latter half of the year. The daily market averaged €111.93/MWh for much of the period, while early 2022 saw elevated prices compared with the same months in prior years.

Authorities extended the VAT reduction on electricity bills from 21% to 10% and reduced the special electricity tax, with extensions in place through late April. The temporary suspension of the 7% production tax for companies applies through the end of March for now.