MADRID – The so-called ‘Iberian energy island’ consisting of Spain and Portugal is not getting the desired gas price reduction in Brussels. The EU raises the maximum price of gas for the two countries and sets it at €50 per megawatt.
‘El Independiente’ writes this based on sources from the energy sector. EU member states such as France, Germany, and the Netherlands would oppose setting the maximum price of gas at €30 per megawatt-hour on the electricity market. This was the proposal of Pedro Sánchez and his Portuguese counterpart, António Costa.
Brussels reject maximum gas price cap proposal
The same sources warn that the Member States are again divided over this measure. As indicated by the media quoted, the European Community bloc would be willing to accept a maximum of €50/MWh.
Therefore, Spain and Portugal will have to be satisfied with limiting the price of a megawatt-hour to €50. According to the sources, the more important countries within the EU are concerned about the effect a price cap would have on competitiveness: “It is likely that EU industrial customers outside Spain and Portugal will complain about the perceived unfair competitive advantage that they have a very low cap,” analysts in El Independiente assure.
The proposal that the administrators of Spain and Portugal agreed to tackle the price of gas for electricity production was handed over to the European Commission on Wednesday so that it could give its approval to the “Iberian exception”.
Two circumstances for Iberian exception
Two conditions were taken into account for this energy island:
- the high level of implementation of renewable energy sources
- the peninsula’s few connections with the rest of the European continent.
Furthermore, this measure would be in effect until December.
With this proposal, they want to significantly reduce the electricity bill, which ultimately affects inflation. In Spain, it stood at 9.8% in March, while in Portugal it was 5.3% according to official data.
The measure affects the wholesale electricity market. The marginal system that works across Europe means that the price is determined by the last energy entering the system. Therefore, at current prices, this is gas-fired power.
The document prepared by the two governments limits the application to fringe technologies: “In particular, and for the Iberian mix, it will only apply to combined-cycle gas-fired, coal-fired and cogeneration plants.”
Temporary and exceptional measures
It also specifies that they are temporary and exceptional measures, as agreed at the European Council, given the “exceptional circumstances causing serious economic difficulties” in the two countries.
Bal is now in Brussels’ court
Now the ball is in Brussels’ court. Speaking at Monday’s conference, President Pedro Sánchez hoped the measure would be approved by Brussels “in a very short time.” It could then be published ‘with immediate effect’ in the BOE the next day. However, on Tuesday, third vice president Teresa Ribera spoke of about “three or four weeks” before coming into force.