This electricity price trajectory is expected to persist over the next two years. As the head of the Iberian Market Operator (OMIE) indicated during his remarks at Forum La Toja, Carmen Becerril spoke about returning to mid-priced energy because the gas market, which influences electricity prices, generates pollution and must respond. The market has some capacity to react, albeit slowly. Gas supplies and regasification facilities are expected to meet demand within three years, and the question remains how spending will unfold in the near term. Prices have moved in a way that could become cheaper, but the path remains uncertain.
There was a discussion about the electricity market. Becerril noted that the upcoming month could bring changes in response to price pressure. The Chairman of the Commission had already announced the pricing system, a shift prompted by the dominant role of gas as a price indicator for the system as a whole. The high representative of the European Union, Joseph Borrel, who attended the event, commented that Europe has delegate energy decisions to Russia and China as a source of low-cost energy. The conversation touched on Europe’s energy delegation and the broader implications for price formation.
Still, Becerril remained skeptical about the Brussels proposal. He suggested it would alter the current dynamics. The existing model emphasizes marginal pricing, which links the price to the most expensive unit needed to meet demand. He stressed that the electricity market could evolve, but the commissioner might insist on keeping some aspects of the marginalist approach as part of the reform proposed by the European Commission, in response to Borrel’s comments. Becerril recalled how the United Kingdom, a nation Spain and much of Europe looked to for guidance, underwent changes to its system a few years ago and later sought to reclaim a portion of energy in the marginal market because there was no clear price signal. He warned that a pure marginal market has flaws for a product like electricity, but warned against dismissing price signals altogether.
As OMIE’s president defends the concept of a broadly shared marginal market across European Union countries, he notes that the system in Spain has operated since 1998. Aside from a brief scare when prices hit 73 euros per megawatt hour in 2006, the average price has hovered around 50 euros per megawatt hour for more than two decades. He argued that by 25, the market should reflect changes in supply and demand. In 2020, prices of 17 euros per megawatt hour were observed when demand fell. The discussion touched on the most regulated rate of the Voluntary Price for the Small Consumer and the persistent reality of price volatility for domestic invoices and social considerations.
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If the president of Red Eléctrica is confident, energy security in Spain remains strong, with no fear of outages. The electrical system operator prepared a report at the request of the Ministry of Ecological Transition to assess possible scenarios and ensure readiness for any situation. In a worst-case view, the connection with France would reach its capacity limits, so measures were outlined to prevent negative outcomes. These include promoting cogeneration, creating a new demand-management mechanism, and accelerating the deployment of renewable facilities, as outlined in the report.
Currently, Spain exports electricity to France up to its capacity, but this export level is limited. France has seen the temporary shutdown of 32 nuclear reactors, creating a challenge that does not offer a quick fix. As a result, Spain and Portugal are working to guarantee supply in the southern region.