Average wholesale electricity prices edged slightly lower this Friday, dipping by 0.11% from yesterday, yet staying above 214 euros per megawatt hour (MWh).
Data from the Iberian Energy Market Operator (OMIE) show the Friday average at 214.50 euro/MWh; yesterday’s rate stood around 24 cents higher than Thursday’s 214.74 euro/MWh.
The day’s high is forecast to occur between 23:00 and 12:00, reaching 240 euro/MWh, while the daily low of 172.44 euro/MWh is expected between 16:00 and 17:00.
Compared with a year ago, the Friday price is markedly higher, with an increase of about 168.8% over the 79.8 euro/MWh recorded on 3 June 2021.
Pool prices directly influence the regulated tariff known as PVPC, which covers roughly 11 million households in the country and serves as a benchmark for the roughly 17 million consumers who buy on the free market. The CNMC confirms that in 2021 about 1.25 million people switched from PVPC to a fixed-price free-market rate as part of ongoing market fluctuations.
In the broader context, Spain’s energy regulator noted the transition during 2021 as part of the evolving price landscape, highlighting shifts between regulated and market-based supply models.
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On 14 May, the Official State Gazette published a Royal Decree establishing a mechanism to cap gas prices for electricity generation at an average of 48.8 euro per MWh over a 12-month period, covering the upcoming winter when prices tend to rise. This measure is issued as a Royal Decree but still awaits formal Brussels approval and will be enacted through a ministerial order.
Calculations indicate that, under the cap, the average PVPC consumer could see a discount of about 15.3% during the first year after the cap’s application on gas-powered generation. Industrial users exposed to spot prices might see reductions ranging roughly from 18% to 20% in the initial month, with subsequent declines following a similar trend.
Economists note some uncertainty surrounding the exact price fall once the gas cap takes effect, but forecasts generally place the reduction in the 15% to 20% range. Industry analyses also point out that Spain may incur higher costs than Portugal to implement the cap, reflecting differences in market structure and hedging strategies.
These dynamics partly stem from the spread of electricity futures contracts, including the interpretive nuances that shape sector expectations and resource allocation.
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STABILITY IN ANTICIPATED TRENDS
Initial observations trace back to February 24, when the invasion of Ukraine began; the wholesale price stood at 205.6 euro/MWh. Since then, prices rose and peaked on March 8 at 544.98 euro/MWh, marking a historic high. Since mid-March, prices have hovered around 250 euro/MWh and recently slipped under 230 euro/MWh, signaling recent moderation.
MARCH: A RECORD BREAKER FOR HIGH PRICES
Still, the late winter and early spring of 2022 saw extraordinary price levels. The average wholesale price for March hovered near 283.30 euro/MWh, with some days well above the December 2021 average, underscoring the unprecedented market pressure and volatility.
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Wholesalers hold a direct influence over the PVPC tariff, which covers about 11 million consumers in Spain and serves as a benchmark for the remaining 17 million contracting in the open market. Geopolitical tensions around Ukraine and Russia could push energy prices higher in the weeks ahead, particularly gas, given potential disruptions to European imports. To cushion the impact on households, the government extended the VAT reduction on electricity bills and kept the general tax relief in place until late spring. The rise in Europe’s energy prices is driven by global market dynamics and the higher cost of gas used in combined-cycle plants, alongside the impact of CO2 emission rights on the day‑to‑day pricing.
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To soften the price shock, the government extended the tax relief on electricity bills for the first four months. The uptick in prices across Europe is driven by international markets and gas dynamics, with CO2 pricing also playing a role. The ongoing geopolitical situation could continue to influence energy costs, particularly for gas imports affected by sanctions. The year 2021 remains noted as one of the most expensive electricity years in history, driven by a sharp post‑summer surge in the pool price. The government’s tax relief measures have been extended through spring, aiming to reduce burdens on households and small businesses alike.
The government’s extended relief includes extending the reduction of related taxes and maintaining the special electricity tax relief, though certain production tax suspensions are time-limited and subject to review. These policy choices reflect a broader effort to stabilize consumer bills amid a volatile energy market.