The Government studies subsidizing gas plants to make electricity cheaper | Companies

Teresa Ribera, Vice President for the Ecological Transition.

Teresa Ribera, Vice President for the Ecological Transition.

The Spanish Government, together with other European partners, has set itself the goal of convincing Brussels of the need to impose a cap on the price of electricity generation with gas in the wholesale electricity market (pool) for prevent this fuel from marking the price marginal to other technologies (nuclear, hydroelectric and some renewables), whose production costs are far from the price of gas, exorbitant for months and, especially, after the start of the war in Ukraine.

Meanwhile, the Ministry for the Ecological Transition that directs Theresa Rivera is studying other options in order, without modifying the functioning of the pool, which Germany and other Nordic countries are strongly resisting, to lower the price of offers for combined cycle power plants in the electricity market, which would lower the marginal or don’t mark it for the rest. According to sources in the sector, this would be achieved by subsidizing the price that these plants pay for fuel to marketers at international prices.

In other words, not touch the electricity market, but the gas market. Compensating the cost of gas, for example, from 120 euros MWh to 40 euros MWh, taking into account the demand (38.4 TWh last year), and the cost of CO2 (decreasing) would lower electricity in the pool at 190 euros MWh. The system would achieve great savings, but the subsidy would have to be borne by the State. The Government prefers, however, the option of imposing a cap on the price of poolbecause in this way it is the electricity companies with inframarginal technologies that would pay by not receiving the heaven-sent benefits for the gas (windfallgas).

Confusion spread last week after the European Commission published its recommendations (tool box) for the exceptional situation of the energy markets in Europe, in which it makes State aid more flexible or allows a reduction in windfall gas. Something that Spain already applies since last autumn and it is of little use because, suddenly, almost all the energy is sold bilaterally, in term contracts to which said deduction cannot be applied, although their prices are, more or less, in line with those of the pool.

Although the Brussels communication includes the possibility of capping the market price, only refers to the retailer, that is, lower the final consumer’s bill charged to public funds. For the time being, pressure from many governments to impose a price cap they have had no effect, because countries like Germany or Denmark and Commission officials refuse to touch the market, both because of its enormous technical complication, and because of the conviction that it would not have the desired effect, of lowering the price.

From the informal Summit of Heads of State held last Thursday and Friday in Versailles, only came Brussels’ commitment to unlink both prices and make a proposal, it did not say which one, at the formal meeting at the end of March. The Spanish Government will wait. This was demonstrated by the president, Pedro Sanchez, by announcing a tour of several countries to gather support to set a cap on gas at a European level.

The Commission is receiving an avalanche of proposals. The most unusual is that of Greece, which asks for an intervention in the Dutch gas market, something impossible, since it is a platform that carries out futures transactions throughout the world.

urgent measures

Meanwhile, the Council of Ministers plans to approve tomorrow, through a royal decree law, a battery of measures to alleviate the electricity bill, especially for vulnerable consumers and companies. But said package will not include the controversial chapwhich could be approved, along with other less mature measures, a little later.

Among those that would be approved tomorrow, a reform of the social bonus electricity to which vulnerable consumers (1.2 million) are entitled, which would be separated from the regulated rate (PVPC) and, therefore, from the wholesale market price. In parallel, it has to approve a new financing model for said bond, in which it would also include the regulated companies that manage the networks as financiers: the transport, Red Eléctrica, and the distributors.

The rest of the measures are known: the extension of the cut of the taxes of the light (the suspension of the 7% tax on generation and reductions in VAT to 10% and electricity tax to 0.5%). In addition, industry tolls will be compensated by 80% via Budgets, in view of the new flexibility to give State aid, as Germany and France already do without opposition from the EC.

The Government will also regulate the extraordinary anticipated review of the remuneration of renewables of the so-called Recore, which will allow a reduction in the charges of the invoice in almost 2,000 million of euros. And it could approve the development of primary energy auctions.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button