State Reinstates Its Energy Measure to Stabilize the Grid and Finance the System
The state reactivated a financial mechanism within the electricity market to smooth out yearlong imbalances. By leveling monthly revenue and costs, the measure aims to prevent hypothetical delays at year end and to support stable operations for the electrical system. This approach was formalized through a royal decree on energy measures, approved by the Executive Board on a Tuesday and published in the Official State Gazette on the following Wednesday.
Preliminary results for the year 2021 are not yet conclusive. The Government has stated that the practice described in the royal decree will conclude with a surplus. A temporary credit point of 231.82 million euros was reported by the National Markets and Competition Commission, CNMC, and this amount will be used to cover monthly imbalances or a potential precise imbalance at year end. This interpretation aligns with the decree’s aim to bolster liquidity and reduce the need for additional financing during fluctuations in the electricity market.
Recent provisional CNMC data indicate that as of June, the monthly balance shows a negative offset of 1,051.8 million euros, though this figure remains fluid. CNMC explains on its blog that settlements occur monthly between counterparties who have payment obligations and those with rights to collection, creating a gap between accrual and actual cash flow. To illustrate the timing, income from January invoices may not be received until March, and similar delays recur in subsequent months.
The monthly deviations between income and expenses are treated as a proportional component of the regulated electricity system fees. These deviations involve the operators of the electricity transmission network, the distribution parties both large and small, and over 60,000 installations including renewable energy facilities, cogeneration assets, and waste-to-energy projects through RECORE. The Ministry of Ecological Transition has thus taken a step to bolster liquidity for these entities through regulated system fees. The rule explicitly states the objective of enabling liquidity for companies and reducing the need for financing imbalances in the electrical system. This approach is designed to prevent liquidity shortfalls from threatening system reliability.
This is not a novel strategy. A similar facility was already provided in 2020. The electric sector has effectively used a type of balance reserve, often referred to as a piggy bank, which accumulated roughly 1 billion euros from 2014 to 2018 and helped ease deficits in 2019 and 2020 during periods of reduced electricity demand associated with lockdowns. The overall picture over the past fourteen years shows a debt accumulation near 30,000 million euros. By the end of 2021, that debt level remained substantial, standing at around 12,182 million euros and being allocated to invoice costs.
The electricity sector laws indicate that surpluses should be used to reduce debt more rapidly. In recent years, the pandemic and subsequent geopolitical tensions interrupted this objective. The ongoing dynamics in energy markets continue to shape the balance between maintaining liquidity, supporting investment in infrastructure, and reducing long term liabilities, with ongoing monitoring by regulatory authorities and policymakers to ensure stability in the electrical system. All figures cited draw from official CNMC data and the department’s public communications and analyses as of 2021 and early 2022, with attribution to the CNMC and related regulatory sources.
[Citation: CNMC blog and official CNMC publications]