Average wholesale electricity prices for this Tuesday are projected to fall by 0.83% from yesterday, staying below 200 euros per megawatt hour (MWh).
According to data published by the Iberian Market Operator (OMIE), the average price on Tuesday is expected to be 193.32 euro/MWh, which is 1.62 euros cheaper than Monday’s level of 194.94 euro.
For June 7, the plan is to record a high of 228.81 euro/MWh between 22:00 and 23:00, while the daily minimum of 164.07 euro/MWh is anticipated between 17:00 and 18:00.
Compared with a year ago, the Tuesday price is 142.59% higher than the 79.69 euro/MWh observed on June 7, 2021.
Pool prices directly influence the regulated tariff, known as PVPC, which covers roughly 11 million households in Spain and serves as a benchmark for the 17 million households that obtain energy on the free market.
In 2021, the National Markets and Competition Commission (CNMC) confirmed that about 1.25 million people switched from PVPC to a fixed-price free-market rate as energy prices rose.
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On 14 May, the Official State Gazette published a Royal Decree establishing a mechanism to cap gas prices for electricity generation at an average of 48.8 euro/MWh over 12 months, aiming to cover the next winter when energy costs are higher.
Although presented as a Royal Decree, the measure still awaits an official Brussels decision and will be enacted by a ministerial order for implementation.
The government plans to limit the discount for the average electricity consumer under PVPC to 15.3% during the 12 months after the cap applies to gas-fired electricity generation. This summary is based on a legislative decree accessed by Europa Press.
For industrial users fully exposed to spot prices, the government estimates a reduction in bills of between 18% and 20% in the initial month, with the 12-month outlook showing reductions between 15% and 17% and between 13% and 15% thereafter.
Teresa Ribera, the minister for the Ecological Transition and Demographic Challenge, acknowledged some uncertainty about the exact drop in electricity prices once the gas cap takes effect, but the government foresees a shift of 15% to 20% in the near term.
Under the cap, a measure adopted by both Spain and Portugal, Spanish consumers could face around 600 million euros more in costs than Portuguese counterparts to implement the mechanism, according to industry estimates cited by Europa Press.
This situation arises due to the extension and interpretation of electricity futures contracts in Spain, which shape the sector’s longer-term resources and strategies.
What does it mean to separate the price of electricity from gas?
Click on any device in the calculator to view the price per kWh. It helps illustrate how electricity cost components interact with gas prices over time.
STABILITY SINCE STABILITY
On February 24, when the Russian invasion of Ukraine began, wholesale prices were around 205.6 euro/MWh. Since then, daily movements have occurred, with a peak on March 8 at 544.98 euro/MWh. Afterward, the price hovered near 250 euro/MWh until mid-March and has since fallen below 230 euro/MWh in recent days.
MARCH MOST EXPENSIVE MONTH IN HISTORY
The conflict in Ukraine drove wholesale prices higher. The monthly average in March reached about 283.30 euro/MWh, and early in the month the rate stood around 239 euro/MWh, roughly 55 euro above the December 2021 level, historically the most expensive month.
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Wholesale prices influence the PVPC, the tariff covering around 11 million consumers in Spain, and they set a benchmark for the 17 million more who obtain electricity through the open market. The Ukraine-Russia conflict raises the possibility of further price pressure in the near term, particularly for gas, as European imports face potential disruptions due to sanctions. To cushion the impact on households, the government extended the tax relief on electricity bills until 30 June. Price movements are partly driven by higher international energy costs and the rising value of gas used in combustion plants, which affects the market price of carbon dioxide (CO2) emissions rights.
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To soften the impact of higher electricity prices on consumers, the government extended the VAT relief on electricity bills for the first four months. The rise in prices across Europe is tied to higher international energy costs and the value of gas used in combined-cycle plants, which largely sets the market price along with CO2 emission rights. The ongoing conflict between the two major energy producers could push prices higher in the coming weeks, especially for gas, as European imports face sanctions-related slowdowns.
In 2021, the year stood out as the most expensive for electricity, driven by a surge in pool prices in the second half of the year. The average daily market price for January 2021 hovered around 201.72 euro/MWh, about 235.3% higher than the previous year’s January average, and 15.7% below December 2021’s peak. The government extended the tax relief on electricity bills until April 30, including a VAT cut from 21% to 10% and the electricity tax from 5.11% to 0.5%, while the suspension of the 7% production tax for companies remains valid only through March 31 for now.