The rise in electricity prices keeps climbing. August stands as the most expensive month on record, and this Wednesday marks the second highest daily price ever observed, the peak since the Iberian exception was introduced. Yet, the market action does not halt the increase; it cushions the impact for consumers because the measures in place limit exposure.
In the wholesale electricity market, utilities, marketers, and traders bought and sold energy, averaging 154.9 euros per megawatt hour (MWh) last month, according to data from the market operator OMIE. To determine the average cost for more than 10 million customers under a regulated tariff, an additional 152.9 euros per MWh must be added to cover compensation paid to gas-fired plants as a result of the Iberian cap. This is the price level affected by the gas component under the cap’s framework.
The latest price, which made August the costliest month in history, reaches 307.8 euros per MWh. Without the cap on gas under the special mechanism activated in the Iberian regime for Spain and Portugal since last June, the final electricity market price would have been 376.7 euros per MWh, about 19 percent higher. The Iberian exception softens the rise and keeps Spain’s market from reaching the peaks seen in other major European nations, though prices continue to climb.
Return to price per hour
The natural gas price crisis spans international markets at record highs, with further increases anticipated amid concerns about supply from Russia. Reducing gas plant compensation through the Iberian exception widens the price gap across daily hours, making night rates higher than daytime rates.
A year after the government and the National Market and Competition Commission reshaped the electricity bill by separating price by time of use, many consumers adapted to consuming more electricity at night to save money. The idea of charging more at certain hours and less at others has reversed in several ways as gas costs and weather-driven production patterns shift. The joke about ironing at dawn and running the washing machine has become a reminder of how timing can matter for bills under the regulation and market dynamics at play.
Why this pattern? Because when solar generation lags, and gas-fired plants ramp up to meet demand, the mix shifts. Hydroelectric output is muted by drought, and wind generation remains inconsistent. In August, night-hours saw prices about half again as high as the high-demand evening period, reflecting how supply and demand balance shifts throughout the day.
Specifically, the final electricity price, which combines the market price with the cost of running gas plants, averaged 362 euros per MWh during the early hours from midnight to eight in the morning. In contrast, the peak solar period from six in the afternoon to six in the evening kept the average around 242 euros per MWh, demonstrating the influence of solar input on pricing during the day. An energy consultant group notes that the compensation adjustments have a larger effect when gas cycles are more active, often coinciding with low or no solar radiation and limited wind.
The compensation paid to gas plants to cover actual production costs—now funded by regulated tariff users under PVPC and free-market customers—reached an average of 200.5 euros per MWh at night, nearly double the 112 euros per MWh observed in the evening.