The Government is focusing its efforts on reaching a European agreement to limit the price at which combined cycle plants that burn gas to produce electricity can offer, after discarding its initial proposal to put a cap on the rate in the wholesale market. “The simplest, the cleanest, is to introduce a reference to the maximum price at which combined cycle plants can offer electricity”, the third vice president of the Government and minister for the Ecological Transition, Teresa Ribera, slipped on Tuesday at the conference press release after the Council of Ministers. The same idea has come to light in the meeting that the chief executive, Pedro Sánchez, had held in the morning with the representatives of the electricity companies, as confirmed by two sources familiar with the meeting. It would be, in any case, a temporary measure until the price rope begins to loosen.
Once the ceiling on the wholesale market has been ruled out, an option that provoked the outright rejection of Germany and other northern European countries and that Brussels did not see exactly with good eyes either, Spain is looking for other options that allow it to reach the same point —a reduction in the prices of the retail market, from which the regulated rates that 40% of households have, drink without having to touch the design of the market, something that scales the most rigorous governments.
In terms of the price at which gas plants can offer their energy, the Spanish Executive also has the explicit support of other southern countries, such as Mario Draghi’s Italy or António Costa’s Portugal. And neither does the French president, Emmanuel Macron, seem to view this initiative with bad eyes. “It is not our only proposal, it will be a package that will include more, but this is important,” government sources explain.
Given that the energy generated by gas plants is necessary for the stability of the electricity system —combined cycles guarantee that demand can be covered during the hours when renewables and nuclear power are not sufficient— and that with an unlimited limit plus its reaction would be not to offer light to losses, the scheme that the Government envisions needs to be accompanied by what the third vice president describes as “adjustments former post”: compensation for selling your energy at a lower cost than the generation cost.
There, the range that opens is wide. The first option is that the money comes from a subsidy, which the power companies do not deny, but which arouses misgivings in the Executive because of the impact it would have on the fiscal deficit. The second, which seems to have gained popularity in recent days, would be for that money to go on to swell the rate deficit, as is already the case with the cap applied to retail natural gas contracts. The third, the one that Yolanda Díaz and the rest of the representatives of United We Can in the Executive like the most, and which the Organization for Economic Cooperation and Development (OECD) has also recently defended, would go through financing that gap between the cost of production and a price — capped — for sale with a tax on the meager profits reaped by electric companies in the midst of a global energy storm.
In the meeting held this Tuesday at the Moncloa palace and which has lasted for more than two hours, the Government has not mentioned any tax increase for electricity companies. As in previous appointments, the Executive has asked these companies, according to a source close to the meeting, to provide solutions to “improve the situation and stop price escalation.” Another source underlines the “dialoguing and constructive attitude” of the parties involved and remarks that Sánchez has “reached out to them”. “The tone has been very cordial. Sánchez has asked for ideas, also for the next few days, so that the light is more accessible”, they point out.
He knows in depth all the sides of the coin.
Looking ahead to next week’s decree, in which the Government will reflect the changes with which it seeks to lower energy bills for homes and businesses, Ribera has announced that the text will include a “reinforcement” for industrial consumers who are becoming more being affected by the rise in light and has promised that the reduction of electricity tolls for these companies “will not be the only measure”. “We are working on other hypotheses”, he has stated, without specifying. In the case of the most vulnerable consumers and large families, the head of the Ecological Transition has let it slip that the Government will extend the electricity social bonus, “increasing the number of families that can benefit from it.”
1,900 million to adapt the electricity grid to renewables
The Government announced this Tuesday an investment of 1,900 million euros until 2026 to adapt the electricity grid to the explosion of renewable energies. According to official calculations, the plan will allow this type of energy to contribute up to 67% of the electricity consumed in Spain, compared to 46% last year. The total reinforcement of the transport network will imply a disbursement of just over 5,700 million, while another 1,260 will be used to improve interconnections with neighboring countries: France, Morocco, Portugal and Andorra.
For the first time, the largest investment item will be dedicated to the integration of clean energy in the system, which will receive more than a quarter of the money allocated to improving the network, while the formulas to meet the growth of demand – which until now took the bulk of the funds – now obtains just over 800 million, 12% of the total.