BRUSSELS – The governments of Spain and Portugal have submitted a preliminary proposal to the European Commission to set a gas price of up to €30/MWh in order to reduce electricity costs.
This was confirmed by the third Vice-President and Minister of Ecological Transition, Teresa Ribera, during her visit to the El Bierzo region (León), where she presented the ‘La Térmica Cultural’ project at the Compostilla I thermal power plant.
Furthermore, Ribera made it clear that this was a joint proposal formulated by both governments. Subsequently, it would have to be negotiated with the European authorities. It contains two adjustments. Under the first; ‘border adjustment’, electricity exports to other countries are compensated at the price that would have been agreed upon without the adjustment mechanism. In the second variant; the amount of additional gas costs would be automatically allocated to cheaper technologies (this already includes this adjustment mechanism).
The Spanish and Portuguese governments have proposed that the price at which this adjustment should take place should be €30. It predicts that the price of electricity could be contained ‘in 3 or 4 weeks and asked for some patience. Therefore, ‘it is important that the common proposal is ‘well composed’. And, furthermore that the possible technical objections to its proper functioning that may exist have been properly examined’.
Nevertheless, there is now a battle going on with the European authorities. Although Brussels has promised flexibility in allowing the so-called ‘Iberian exception’, there are differences of opinion over the price ceiling. The €30/MWh gas price the governments are aiming for would translate into an electricity price of around €100/MWh. The Commission does not want the difference between the Iberian wholesale price and the rest of the EU countries to become too large. This is to avoid undermining the current system or causing many more countries to want to join the system.
Intervention important for Spanish government
Ribera stressed that the Spanish government considers it “essential to intervene” to alleviate the cost of electricity. And it expressed gratitude for the “understanding” of the rest of the European leaders for the Iberian exception. According to Ribera, since the summer of 2021, when tensions began over the supply of gas from Russia to Europe, the price of electricity has fallen ‘absolutely outside any normal or predictable pattern’. Therefore, this explains why both the 2021 and 2022 prices are ‘far above’ all historical data.
Exceptional and temporary measure
Prime Minister Pedro Sánchez already announced on Monday that Spain and Portugal wanted to submit to Brussels this week an ‘exceptional and temporary’ measure to set a gas cap, after they managed to reach an exception for the Iberian peninsula’ at the European Council on Friday that allows lower electricity prices in both countries.
No distortion of the European electricity market
Sánchez stressed that this measure ‘does not subsidise gas, break incentives for renewables or electricity flows between countries’. Moreover, it will allow Spain and Portugal ‘to significantly reduce electricity prices immediately’ without ‘disrupting’ the European electricity market. ‘I am convinced that the approval by the European Commission will be granted in a very short time and will be approved in the Official Gazette the next day with an immediate impact on citizens’ electricity bills,’ he stressed. Sánchez also explained this Wednesday in the Congress of Deputies that the costs of this measure would be borne by the energy system itself, in other words, there are no subsidies or state aid involved.