Spain has been steadily expanding its electricity exports to France, setting several cross-border shipment records amid the ongoing energy crisis. With more than half of France’s nuclear fleet out of service for maintenance and corrosion issues, there is a pressing need to import power from the Iberian market to secure supply for the French grid.
The interconnections between the two nations are nearing capacity as France keeps its grid stretched to the limit—operating at the 99th percentile of hours in the last two months—while electricity prices rise. In contrast, Spain enjoys relatively lower prices, aided by what is known as the Iberian exception. Implemented in mid-June, this mechanism caps gas prices used to generate electricity in Spain to cool prices across other generation technologies. Presently, the cap has limited impact because gas prices in Spain are already low.
The surge in exports to France and the widening price gap between the two markets have boosted congestion rents—the payments that electricity networks earn for moving power across borders, calculated from the traded energy volume and the price differential between Spain and France.
Millionaire Response
As electricity flows increase and the price gap grows, congestion rents rise and are shared by Spain and France. Before the Iberian exception, these rents in Spain mainly funded access fees for the Spanish grids.
Four months ago, the government permitted a portion of these revenues to be directed toward compensating the gas plants that benefit from the Iberian exception. These plants sell electricity at real gas prices, free from the caps imposed on other technologies, helping to shield consumers from higher electricity costs. As a result, some congestion revenues can offset the compensation paid to gas plants and ease the burden on Spanish electricity consumers.
More than half of the roughly 700 million euros in congestion rents collected since the gas cap began operating have been redirected to reduce compensation costs. Between 15 June and 17 October, 414 million euros were injected from congestion rents, according to records from the Ministry of Ecological Transition cited by El Periódico de España and the Prensa Ibérica group, lowering the adjustment payments to gas plants.
The government estimates that using congestion rents to finance part of the gas plant compensation lowers the cost faced by demand in the electricity market. In practical terms, this means the price paid by final consumers in Spain could be reduced, even as markets respond to supply dynamics and cross-border trading.
Last customer pays
Interconnection capacity is allocated through annual, monthly, and daily auctions. In these auctions, companies that can act as both exporters and importers influence prices as they move energy across the grid, bearing the network costs that end up paid by the importing country’s final consumers. In recent months, French customers have benefited from lower prices in the Spanish market, while Spanish consumers do not bear the entire burden of compensation to gas-fired plants, since congestion rents partially fund those costs.
Critics argue the Iberian exception subsidizes cheaper energy for French consumers and encourages gas plants to ramp up exports to meet demand, potentially driving up compensation adjustments. Supporters counter that the Iberian exemption has worked as intended: within four months of its introduction, Spanish households saved substantial sums as wholesale electricity prices were tempered despite ongoing compensation payments to gas plants. The latest figures indicate a meaningful reduction in the overall cost of gas-plant compensation, with congestion rents contributing to this easing effect (Attribution: Ministry of Ecological Transition, El Periódico de España, Prensa Ibérica).