MADRID – On Saturday, the price for electricity in Spain will become the second-highest after the previous record at €366.55/megawatt-hour. In December, the current record was reached with €383.67.
The rise in natural gas prices as a result of the war in Ukraine is also starting to affect the electricity market. Hence, the electricity price is already flirting with its record highs. On Saturday, the wholesale market noted an average price of €366.55/megawatt-hour. That is the second historical maximum, after €383.67/megawatt-hour on December 23, 2021.
Plus, it’s the weekend, a time when prices tend to soften due to a drop in demand. Experts, therefore, predict that the record in the energy price level will be broken again next week. Unless something changes and the European Commission decides, for example, to disconnect gas from the electricity market, as Spain urgently requests.
Historical maximum TFF gas price
The gas price on the reference market for Europe, the Dutch TTF, reached its historical maximum of €199/megawatt-hour on Thursday. That was in the heat of the Russian invasion of Ukraine and fears of an interruption in supplies to Europe.
Every year, Europe imports about 40% of Russian gas. An interruption in the supply of this liquid makes investors tremble.
First interruption in gas supply
The first interruption was even made on Friday. It concerns the delivery of the Yamal Europa gas pipeline. This represents about 15% of Russian gas imports. For example, the gas price will continue to rise on Friday, from €158/megawatt-hour at the opening of the session to €188 in the middle of the day.
Added to this are the self-imposed sanctions of many European companies for not wanting to buy Russian gas. In addition, the Confrentes nuclear power plant in Spain is running at half its level, according to energy expert Francisco Valverde in Diario de Mallorca.
A system that determines the price for the rest governs the electricity market. In this system, the latest technology matches supply and demand. As a result, the price of gas marks the evolution of the price of electricity on the market (known as ‘pool’).
EC comes with package of measures
Next week the European Commission will present a new ‘toolbox’ with measures to tackle the energy price crisis. In this sense, Brussels examines the possibility of decoupling the price of gas from the wholesale market for electricity. Spain has asked this repeatedly since the price crisis began last summer as a result of Russian President Vladimir Putin’s decisions to cut gas supplies.
High electricity price for consumers with PVPC
The high energy price only has direct consequences for consumers who are in the regulated market. The so-called Voluntary Price for the Small Consumers (PVPC) applies to them. In addition, this rate also serves as a reference for the rest of the rates that commercial providers agree with their customers.
The energy price used to represent about 30% of the electricity bill. Taxes represent 20% and 50% consist of the regulated costs. Now the weight is slightly higher. That it is not much more is because the government has reduced taxes and levies. The VAT on electricity went to 10%. Furthermore, they suspended the tax on the value of production of 7% and the special electricity tax from 0.5% until June 30.