In 2023, electricity prices opened with a notable rise, increasing as much as 5.85 euros per megawatt hour (MWh). This marks roughly four euros more than the year before and aligns with wholesale market auctions and the costs borne by beneficiaries of the gas cap.
The climb was briefly interrupted by a four‑day slide and reached a two‑year low, coinciding with the Iberian mechanism aimed at limiting gas costs for power generation. The mechanism raised its cap from 40 euros to 45 euros on 1 January, to better control the price pressures in the energy mix.
Without that measure, the wholesale price for the market would have stood around 31.1 euros per MWh. That figure is roughly 25 euros higher than the values reported by the Iberian Electricity Market Operator (OMIE) and the Iberian Gas Market (Mibgas).
The final average price reflects the registered 6.7 euros per MWh adjustments, with the New Year’s market correction applying to those benefiting from the gas cap as a temporary bridging mechanism. The adjustment to support generation using gas would be negative, at about -0.85 euros per MWh.
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In practice, while price corrections can swing downward on some days, that trend does not always persist, and similar fluctuations may occur again tomorrow.
Based on time zones and excluding adjustments, the lowest price seen during the day could be 0 euros per MWh between 00:00 and 13:00, while the highest could hover around 40.07 euros per MWh from 21:00 to 23:00. This 0 euro level for much of the day does not imply a regulated rate for consumers, because contracts reference wholesale prices while fixed costs remain part of the bill.
Italy, for its part, stands out as an exception in Europe with an average around 193.14 euros per MWh. In the United Kingdom, prices equate to about 102.2 euros, roughly 90.59 pounds. Germany and France also show lower levels, around 14.91 euros per MWh. In Portugal, where the Iberian exception applies, prices align with Spain’s, as both share the same market framework.
New stage for the peak of gas
Since the session on 14 June, wholesale markets determine next‑day prices, with the Iberian exception establishing a gas reference price of 40 euros per MWh for the initial six months of the mechanism. After this period, the price is set to rise by five euros per month, finishing near 70 euros per MWh by the end of the planned measure at 31 May, signaling a return toward normality.
This Sunday marks the first day with a 45 euro per MWh reference price, as confirmed to EFE by sources from the Ministry of Ecological Transition. The ASE energy advisory group has noted that the five‑euro step could push gas‑powered combined cycle offers higher by about 10 euros per MWh, which in turn influences the pool prices in the wholesale market.
Energy measures
Beyond the gas cap, the government moved to expand its energy relief measures. The Official State Gazette (BOE) notes that the VAT discount on electricity components, reduced to 5%, was extended through 31 December 2023 to help with input costs. In addition, biomass and wood briquettes or pellets used for heating are being incentivized to reduce consumption and emissions.
The latest royal decree extends 5% VAT on certain electricity supplies and a 0.5% surcharge reduction on electricity until the end of 2023. It also maintains the temporary suspension of the value‑added tax on electricity generation and preserves protections that prevent the immediate cutting off of basic electricity, water, and natural gas services for vulnerable households and unemployed workers who rely on social bonuses.
On the policy front, the government plans to reduce electricity bill charges for households and small and medium enterprises by an additional 9.21% in January, a proposal from the Ministry of Ecological Transformation that awaits final publication in the corresponding official gazette. This plan focuses on easing cost pressures for consumers while the broader energy transition continues.