The wholesale electricity price is set to rise again this Monday, with an increase of 53.45% over the level seen this Sunday, bringing the market average close to 200 €/MWh.
Data from the Iberian Energy Market Operator (OMIE) and compiled by Europa Press show that the average pool price for 16 May stands at 195.23 Euro/MWh.
For Monday, the highest hourly price is projected at 248.08 €/MWh, while the minimum price during the day is expected to be 160.32 €/MWh, recorded between 15:00 and 16:00.
When compared to the same day last year, the Monday average is markedly higher, reaching an increase of about 632.57% above the 26.65 €/MWh recorded on 16 May 2021.
Pool prices directly influence the regulated tariff known as PVPC, which covers roughly 11 million households in the country and serves as a benchmark for the remaining 17 million households that purchase via the free market.
In 2021, the CNMC reported that around 1.25 million households switched from PVPC to a fixed-price free-market rate as electricity costs continued to rise.
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GAS STOP
A Royal Decree published in the Official State Gazette set out a mechanism to cap the price of gas used for electricity generation at an average of 48.8 euros per MWh over a 12-month period ahead of the next winter, a time when energy costs tend to rise.
Following cabinet approval, the government noted that when the measure takes effect and Brussels approves support, it would be implemented immediately. The standard could take about two weeks to come into force, potentially delivering immediate relief to about 37% of residential customers and 70% of industrial users.
Ministry sources clarified that although the mechanism is published as a Royal Decree, it will remain in place pending an official Brussels decision and will be enacted by a ministerial order upon implementation.
The vice president highlighted that this change should lower the pool price by roughly 38%, bringing the average down from this year’s first quarter level of around 210 €/MWh. The adjustment means that only gas-generated electricity will bear higher costs for consumers consuming gas-fired generation.
The measure aims to curb rising prices and inflation and to act as a shield against fluctuations in gas prices driven by the war in Ukraine, while also facilitating reform of the PVPC futures reference prices.
Ribera indicated that once the measure is in effect, consumers in the regulated market would see the price reduction immediately, while those in the free market would experience a gradual pass-through linked to their renewal cycles and annual revisions.
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STABILITY SINCE THE START
The conflict in Ukraine began on February 24, and the wholesale price rose steadily, peaking on March 8 at 544.98 €/MWh. Since March 12 the price has hovered near 250 €/MWh, with a recent slip below 230 €/MWh.
March turned out to be the most expensive month on record, with the average wholesale price around 283.30 €/MWh. By contrast, the peak in December 2021 remains a benchmark for the volatility seen in the market.
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Wholesale prices have a direct say in the PVPC, which covers about 11 million consumers and sets a reference point for the 17 million households that purchase in the open market.
The ongoing Ukraine-Russia conflict could push energy costs higher in the weeks ahead, especially for gas, as European imports face potential slowdowns due to sanctions.
To soften the impact on households, the government extended the VAT reduction and electricity tax relief through June 30.
The rise in Europe’s prices is driven by global market costs and higher gas prices used in combined-cycle plants, compounded by CO2 emission rights.
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The government extended the tax relief on electricity bills for an initial four months to cushion the impact of rising prices.
The strength of price growth across Europe stems from higher international energy costs and the growing price of gas used in efficient plants, influenced by CO2 rights.
The geopolitical situation could push energy costs higher in the near term, as European imports from Russia may face constraints amid sanctions.
2021: The Year of Record Electricity Prices
The year closed with electricity costs showing extreme highs due to the market’s upward spiral, averaging around 111.93 Euro/MWh for the period and peaking early in the year at elevated levels.
The price for January also stood around 201.72 €/MWh, marking a significant year-over-year increase and illustrating the volatility that defined the market in that period.
The government maintained the tax relief on electricity bills up to April 30, ensuring some relief for all consumers. In particular, VAT reductions and lower electricity taxes were extended, while the suspension of a production tax for companies was kept in place only through the end of March for now.