The wholesale electricity price is set to rise by 2.1% this Tuesday compared with Monday, edging closer to the 2.00 euros per megawatt hour (MWh) mark.
Specifically, the average pool price for Tuesday is forecast at 199.36 euros/MWh, up from 195.23 euros yesterday, according to data from the Iberian Energy Market Operator (OMIE) and compiled by Europe Press.
The day’s highest price is expected between 265.88 euro/MWh and a low of 160.99 euro/MWh, with peak periods around 15:00 and 16:00.
Compared with a year earlier, Tuesday’s average price is 159.5 percent higher than 76.82 euros/MWh on 17 May 2021.
Pool prices influence the regulated rate, known as PVPC, which covers roughly 11 million households in Spain and serves as a benchmark for the remaining 17 million customers who buy in the open market. This linkage means any movement in the pool has a direct impact on consumer tariffs (their supply in the free market) as well.
In 2021, the National Markets and Competition Commission (CNMC) noted that about 1.25 million people switched from PVPC to a fixed-price free-market rate during a period of rising costs in the energy sector.
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The Official State Gazette (BOE) published a Royal Decree this past Saturday that introduces a mechanism to cap the gas price used for electricity generation at an average of 48.8 euros per MWh over a 12-month window. As winter approaches, energy prices tend to climb, prompting measures like this.
Following Cabinet approval on Friday, Teresa Ribera, the third vice president and minister for the Ecological Transition, noted that once the measure takes effect this Saturday and Brussels formally accepts the backing, it will be implemented at the European level. The standard could be delayed by about two weeks, but it would bring immediate relief to about 37% of domestic consumers and 70% of industrial users when fully in force.
Officials from the Ministry of Ecological Transition stated that the mechanism is published as a Royal Decree but will remain pending an official Brussels decision and will be enacted by ministerial order for implementation.
The vice president projected that the measure would reduce the pool price by roughly 38%, bringing the average from around 210 euros per MWh in the first quarter of the year to a lower level. The change means that only gas-generated electricity would carry higher costs for consumers consuming gas-fired power output.
Overall, the move aims to curb upward price pressure and inflation, acting as a shield against gas price volatility driven by the war in Ukraine and enabling a smoother reform of regulated tariffs—specifically the PVPC—alongside futures price references.
Ribera affirmed that once the measure takes effect, regulated-market customers would immediately feel the impact, while those on the free market would see a gradual benefit that aligns with their renewal or price-change cycles when their annual revisions reference the lower rates.
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STABILITY SINCE STABILITY
When the conflict in Ukraine began on February 24, the wholesale market price stood at 205.6 euro/MWh. Since then, prices have fluctuated, peaking on March 8 at 544.98 euro/MWh. By mid-March, prices hovered around 250 euro/MWh and have since eased to below 230 euro/MWh.
MARCH THE MOST EXPENSIVE MONTH IN HISTORY
The price spike that started February 24 pushed March into record territory. The average wholesale price for March hovered around 283.30 euro/MWh, with some early-month readings near 239 euro/MWh, marking a substantial rise over December 2021, historically the most expensive month on record.
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Wholesalers exert a direct influence on the regulated tariff PVPC, which covers about 11 million consumers in Spain and serves as a reference for the 17 million customers purchasing in the open market.
The ongoing Ukraine-Russia conflict could sustain higher energy costs in the weeks ahead, particularly for gas, as European imports face potential slowdowns due to sanctions.
To cushion the impact on households, the government extended the electricity bill tax cut through June 30. The global rise in energy costs is partly driven by higher international market prices and the increased cost of gas used in combined cycle plants, along with the price of carbon dioxide emission rights (CO2).
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To mitigate rising prices, the government has extended the tax relief on electricity bills for the first four months. Factors driving higher prices include international market dynamics and CO2 emission rights. The conflict between the two former Soviet countries may push energy costs higher in the near term, especially for gas, as European imports face sanctions-related slowdowns.
2021 became the most expensive year of electricity
The year closed with electricity costs at historic highs due to the pool’s upward trajectory in the second half of the year, resulting in an average price of 111.93 euro/MWh for the market in that period. Early 2022 saw the daily average near 201.72 euros/MWh, substantially higher than the previous year, and still below the peak of December 2021.
The government extended the VAT reduction on electricity bills to April 30, along with reducing the special electricity tax. The production tax suspension for companies remains in effect only through March 31 for now, as the broader fiscal measures are reviewed.