The wholesale electricity market, the so-called ‘pool’, registered a negative price in Spain on Monday for the first time in history. For three hours. Between 2.00 pm and 5.00 pm, the electricity price per megawatt hour on the wholesale market is -0.01 euros.
This is according to preliminary data from the Iberian Energy Market Manager (OMIE). The negative price is mainly due to the storm Nelson. It brought a lot of rain and especially wind. Consequently, the renewable energy sources were able to operate at full capacity. These are two of the cheapest ways to generate energy. As a result, prices plummet.
In addition, Monday is still be a public holiday in several autonomous communities. During these afternoon hours, the least consumption takes place during the day.
Average electricity price
With an average price of €2.76/MWh during the day, the price of electricity will be zero euros or close to zero for all hours from midnight to 8.00 pm today (Monday). The price will go up from 9.00 pm to 10.00 pm. Then the price will be €21.43/MWh, the maximum on this Monday.
Negative price
Thus, April 1, 2024 will be the first day that the daily wholesale market will register several hours of negative prices inSpain. This negative price only occurs in Spain this Monday, not in Portugal. In other European countries, hours with a negative price have already been registered.
The negative prices on Monday in the wholesale market are not reflected in the regulated tariff (PVPC). This is because with its entry into force in 2024, a new calculation method was adopted. This includes a basket of medium- and long-term prices. In addition, the consumer also pays fixed costs.
Average electricity price of 20 euros/MWh in March
The month of April therefore continues the trend of March, when the average price was €20 per megawatt hour (MWh). That’s half of February’s average price and 77.5% lower than in March 2023, when it was €89.6/MWh.
In addition, a minimum price of €0.54/MWh was set on March 10 last month, due to the high participation of renewable energy due to the storms that passed over the country.
In fact, on 16 out of 31 days in March, the pool average was below the €10/MWh mark, and in many hours the price was zero euros/MWh, although this price is not exactly passed on to the bill, as there are fixed costs for the electricity consumer due to tolls, charges and system adjustments.
VAT on electricity back to 21%
In February, the average daily price on the wholesale market was €40/MWh, a decrease of 46% compared to January. As a result, electricity was temporarily refunded 21% VAT from March, after the wholesale market price averaged less than €45/MWh in February, the ceiling set in the Royal Decree on urgent measures.
The last Council of Ministers approved last year that VAT on electricity would increase from 5% to 10% and that this rate would be maintained until the end of 2024. However, this was subject to the condition that MWh prices on the wholesale market would remain high. Specifically, this was above €45/MWh.
Specifically, VAT would become 21% provided that the wholesale price in the calendar month preceding the last billing day was below this threshold.
In other words, all invoices with the consumption of at least one day in March are subject to 21% VAT. However, a number of households are eligible for exemption from this increase. They will continue to pay 10% VAT throughout 2024.
Regulated rate
In any case, the ‘pool’ does not represent exactly the final amount in the electricity price for a consumer with the regulated tariff. This is due to the entry into force in 2024 of a new method for calculating the PVPC. In it, a basket of medium and long-term prices is formed. This prevents strong fluctuations. Without losing the short-term price references that encourage savings and efficient consumption. Specifically, the part linked to the pool price will be gradually reduced by 25%.
