Electricity pricing is fluctuating as the new year approaches. The latest figures show a price drop on New Year’s Eve, with a price cap near 1.82 euros per megawatt hour (MWh), a level that compares to roughly 31 January 2021 readings around 1.42 euros per MWh. This adjustment reflects the wholesale market and the related contributions beneficiaries must pay as part of the Iberian mechanism affecting electricity costs in Spain and Portugal.
Without the Iberian mechanism, which aims to limit natural gas costs for electricity generation, the wholesale price for the upcoming Saturday sits around 40.4 euros per MWh, roughly 39 euros higher than the price that would be expected under the mechanism. This data comes from the Iberian Electricity Market Operator and the Iberian Gas Market, highlighting the distinct price pathways with and without the cap.
The final average price is the result of applying a temporary adjustment to the 2.65 euros per MWh recorded on the wholesale market for the Saturday in question. This adjustment is charged to gas-ceiling users to compensate factories that rely on gas for electricity generation. While the adjustment can sometimes be negative, it is expected to be -0.83 euros in this scenario. The same adjustment pattern may continue on subsequent days, including Friday, depending on market movements.
At 1.82 euros per MWh, this represents the lowest level seen since 1.42 euros per MWh on 31 January 2021, underscoring the volatility of the wholesale market and the impact of policy interventions. Market observers also note that some sources indicate even lower values could occur in the long run, such as the 0.48 euros per MWh reported around early February 2014, which predates the current PVPC framework that sets hourly charges for small consumers.
According to time-of-day bands and excluding the adjustment, electricity prices are expected to peak during the 18:00 to 19:00 window, with an estimated value around 20 euros per MWh. The lowest prices are projected in the early morning hours, between 03:00 and 06:00, when prices may drop to zero or near-zero levels. The market is also anticipated to stay below 0.5 euros per MWh for additional hours, reinforcing the broad intraday volatility that characterizes wholesale trading.
On a continental comparison, notable disparities remain. Italy, part of the broader European electricity landscape, often stands out as an exception with higher average prices, while the United Kingdom, Germany, France, and Portugal reflect a mix of negative and low price signals depending on local production and interconnections. For Portugal and Spain, the Iberian exception continues to influence pool pricing, with interconnection and production mix shaping outcomes in each country. In Germany, the wholesale price can run negative at times, while France maintains relatively lower levels, illustrating the uneven nature of energy markets across Europe. (OMIE, 2024)