The Spanish Government has been asking the European Comission to decouple gas from the electricity market to get the price of electricity down from the 200 euros per megawatt hour (MWh) at which it has been installed since the start of the war in ukraine. Despite Germany’s reluctance, the President of the Government, Pedro Sánchez, emerged victorious from the European Council this Friday and got Brussels to make a temporary exception with the Iberian Peninsula given its low electrical interconnection with France.
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Spain and Portugal will send this week their Joint proposal to the European Commission, although the Government has more than elaborated the idea: limit the price of combined cycle offers that burn gas in the electricity market around 50 euroslet it be your own electrical system that compensates the difference between that maximum and the real cost and establish a double cassation so that the sale of electricity to France is not affected by the price reduction, as confirmed by sources from the Executive to EL PERIÓDICO.
The third vice president and minister for the Ecological Transition, Teresa Ribera, assured this Saturday in statements to the 24-hour Channel of Spanish Television that this measure would be implemented in “three or four weeks.” This occurs not because of Spain’s delay, which has already developed an approach that has also been “worked on & rdquor; with the Community Executive led by Ursula Von der Leyen, but rather because of sheer bureaucracy: the European Commission needs that time to pass the proposal to written procedure by the Committee of Permanent Representatives of the Governments of the Member States of the European Union (COREPER).
Price: close to 50 euros
The price to be set as maximum reference for the offers of combined cycle plants that burn natural gas is one of the “most sensitive” elements. in which the Government works with the European Commission. The average price since the Iberian market has existed is around 20 euros, while in 2021 it stood at around 50 euros and so far in 2022, at 100. The Executive, therefore, believes that “the logical & rdquor; It would be figure between 50 and 100 eurosalthough they add that it will be “closer to 50 euros & rdquor ;.
Compensation: via electrical system
The third vice president and minister for the Ecological Transition, Teresa Ribera, revealed this week at the press conference after the Council of Ministers that Spain’s commitment was to establish a maximum price reference at which combined cycle plants can offer electricity and that, a posteriori, there is an ‘ex post’ adjustment. This adjustment will not be through a subsidy, as ruled out the President of the Government, Pedro Sánchez, after the European Councilnor through the State’s general budgets (PGE) or of the tariff deficit, as it had been shuffled up to now.
The compensation will be made by the electric system. The Iberian Energy Market Operator (OMIE) carries out a auction every hour according to the electricity demand that is needed for that period and the supply that exists at that time. The time slot that is covered with gas (combined cycles) will be recognized at a maximum price (close to 50 euros) and if the real cost is higher, the difference “will be reassigned proportionally to each of the technologies that win the auction at that time.” Namely, will be the rest of the technologies those that pay this difference based on their participation.
Interconnection: double matching
Another question was what would happen to the interconnection with France that, although it is low —2.8%, when it is assumed that the European objective for 2020 was to reach an interconnection of 10%— it could cause a increased sale of electricity to the neighboring country, taking advantage of the fact that in the Iberian Peninsula it would have a cheaper price than the Gallic country. The solution is a “bubble” model. for the Iberian market that is carried out through a double cassation (crossover between supply and demand).
Thus, every hour there will first be a matching of the offer with the demand of France, which billed at regular price (as if there were no cap), and then another is made for consumption in Spain and Portugal with that cap price close to 50 euros. In this way, it is avoided any distortion that could be produced on the market.
Duration: limited to 2022 or until the price drops
The entry into force of the measure will be immediate as soon as the authorization from Brussels is formally obtained (in three or four weeks) and its duration will be temporarylimited to this year 2022 “If there is no first gas drop, that does not seem likely & rdquor; in the middle of the war in ukraine which has doubled the price of natural gas in the reference market (Dutch TTF) —it has gone from 50 euros at the beginning of December to the current 100 euros and reaching over 200 euros at the beginning of March—. The joint purchase of gas, agreed with the rest of the Member States in the Council, will lower prices but “it will take months & rdquor; to get going.