A month and a half after its premiere, the gas cover is bearing fruit. The mechanism put in place by Spain and Portugal – with the consent of Brussels – to avoid the polluting effect of this fuel on the electricity market as a whole has enabled consumers to reduce electricity costs by almost 18% with a regulated tariff. It has also decoupled the price of electricity in the peninsula from the rest of major European markets: if both countries were among the most expensive on the continent before the Iberian exception, they are now among the least onerous. In recent weeks, a second tailwind has been added to Spain and Portugal: their gas market (the Mibgas) has moved downwards away from that which governs the rest of the continent (the Dutch TTF), multiplying the impact of the mechanism.
Since June 15th, the first day of application of the gas cap, the average electricity price in Spain and Portugal has been around 264 euros per megawatt hour (MWh). A very high value in historical comparison and 38% higher than in the previous two and a half months, but also about 20% lower than it would have been without his absence, according to calculations by economics professors at the Complutense University of Madrid (UCM) Raphael Salas, Miguel Sherry Y Franz Alvarez. And, above all, significantly lower than in the other large neighboring municipalities: In Italy, the MWh rose from 234 to 396 euros during this period (almost 70% more); in France from 209 to 368 euros (+76%); in Belgium from 176 to 304 euros (+72%); and in Germany from 171 to 297 euros (+73%). Only the UK can be compared to Spain with an average price of 261 euros, but with a significantly higher increase: 50%.
Two general patterns emerge from this jumble of data. The first is that without a gas cap, Spain would be notoriously worse off than it is. “The tool works because – even in an adverse situation – it makes the negative factors less noticeable,” explains Salas on the phone. The second, that “Spain has gone from being one of the most expensive markets in Europe to one of the cheapest”, in the words of Francisco Valverde, advisor to Menta Energía. As the specialists of the ASE Group add, electricity in Spain is “more expensive than ever”, but also around 26% cheaper than the continental average. A difference that, according to futures, will exceed 50% in relation to France and Germany.
Beyond the cap, another key variable enters the price shaker: the lower price of this fuel in the Spanish market. Today, a megawatt hour of gas for September delivery in the Mibgas costs around 150 euros, compared to around 200 in the Dutch TTF, which serves as a reference for the entire community block. As in the light, the tables have turned: Spain has gone from the caboose to the head.
“The cap is the main buffering element of the price of electricity compared to the rest, but this difference between Mibgas and TTF also helps,” says EsadeEcPol’s Natalia Collado. “It is still a unilateral measure by Spain and Portugal, but it will serve to rethink everything: the design of the European electricity market is a melon that has to open up for the winter. And the Iberian exception has set an important precedent”. In that sense, the peninsular countries would receive a kind of pioneer bounty: a benefit to pave the way for this future community reform.
Greater impact in the coming time
“They are not cheap, let alone, but there is a clear reduction effect compared to the rest of the neighbors,” says Alejandro Labanda, director of ecological transition at consultancy beBartlet, who sees the impact of the price caps going higher in the coming weeks. “Over time compensation [a las centrales de gas que ahora tienen limitado el precio de su principal insumo] will be distributed on more demand. And when the heat subsides, demand will fall and renewable production – the cheapest – will increase.”
In his words, Labanda draws the best operating scenario for the mechanism: when it works best, it’s when more wind and solar energy are in the Mix because it prevents the high cost of producing gas from spilling over to other sources. On the other hand, the gradual increase in the reference price of the cap agreed with Brussels – which is currently EUR 40 per MWh, will increase by EUR 5 per month to a maximum of EUR 70 – will stop this improvement.
Another factor that speaks against the measure is the increase in exports to France. “The price difference with the rest of Europe would be much larger if we didn’t have to use the oldest and therefore less efficient combined cycles to meet the increasing demand in France,” says Javier Revuelta of the Afry-Analysis company. “We give France a lot of money, on average about 250,000 euros an hour at current prices.” Without this handicap, he says, the average daily price for electricity on the Spanish wholesale market should be around 230 euros per MWh – 130 euros matching and 100 more Compensation –, slightly above the current values.
The reasons for decoupling the Mibgas
The other reason for the smaller recent increase in electricity in Spain compared to other European countries is the already mentioned breach of the Iberian gas market in relation to the Dutch TTF, a reference in practically all corners of the continent, which is just reaching its historical maximum days. The reasons are essentially to be sought in two circumstances: the greater capacity of the peninsula to import from all parts of the world, thanks to the enormous traction of its network of regasification plants (the largest in the block: six in Spain and another in Portugal) and the greater filling of its deposits (78% in Spain, eight points above the Community average; 100% in the Portuguese country).
“Spain has enough capacity to import all the gas it needs and more, but the rest of Europe doesn’t,” recalls Afrys Revuelta. “Prices won’t even out until the rest of Europe increases their regasification capacity, and we won’t see that until well into next year. The largest gas consumer in the EU, Germany, does not have a single LNG terminal [gas natural licuado], and by December will not have the first float. They made a big mistake: more than Spanish merit, it’s their merit,” he judges.
reduced by 50 percent
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