And finally, green light. On the horn regarding the term that the Spanish Government had given itself, the European Commission has given its approval this Tuesday to the Spanish and Portuguese proposal to limit the price of gas and coal that feed the electricity generation plants and thus reduce both the electricity bill for 40% of Spanish consumers —those who have a regulated rate— and inflation. It does, yes, with two changes: the cap on gas will not be 30 euros, but 50 in the average of the year the measure is in force, and the peninsular price of electricity will be the same as that applied for exchanges with the rest of the EU, via France.
“There is a political agreement,” the third vice president of the Government and minister for the Ecological Transition, Teresa Ribera, announced in Brussels at a joint press conference with her Portuguese counterpart, Duarte Cordeiro, after meeting with the Community head of Competition, Margrethe Vestager. Along the same lines, but with more caution, sources from the Community Executive recognize the pact, but clarify that “the details still have to be worked on.” The forecast of the Spanish Government is that the measure will be approved in the next Council of Ministers.
The Madrid and Lisbon agreement with Brussels is based on two basic lines. The first would be the one that allows limiting the price of gas and coal for power plants to 40 euros per megawatt hour (MWh) in the first weeks, 10 euros more than what was initially proposed by the peninsular governments. Later, the Community Executive forces this cap to rise progressively, until reaching 50 euros in the average of the 12 months in which this emergency mechanism will be active, which aims to reduce price pressure on households and companies. Natural gas today costs 80 euros in the Mibgas, the Iberian market.
The second part of the pact is one of the ones that aroused the most differences between Madrid and Lisbon and the European Commission, and in which the capitals have ended up yielding: there will not be a double price —one for consumers on the Peninsula and another for those from outside, especially the French—as had been suggested in the first text sent to Brussels for the consideration of its technicians. It will be the same for everyone, so the latter will also benefit from the subsidized energy produced in Spain and Portugal. “The Commission has indicated that it was asking for flexibility so as not to introduce additional limitations at the border, but obviously the French consumer will have to pay the same as the Iberian consumer in this adjustment,” Ribera admitted.
“The European Commission has passed on the request to us to be flexible with respect to how we maintain interconnections, electricity exports from the Iberian Peninsula to France, but has promised to be a much more active actor to monitor full compliance. of an interconnection target that was set for 10% in 2020 and 15% in 2030, but which is still at 2.8%″, described the head of Ecological Transition. Today, electricity and gas interconnections through the Pyrenees are very limited, but sources from the Spanish Executive stress that Brussels has “committed” to “actively work” to increase them.
The most striking point and the one in which there has been the most media debate in recent months is the one that will allow the price of the fuel that feeds the combined cycle and cogeneration plants to be capped. The result of this mechanism, taking as a reference the 50 euros on average that will be paid throughout its period of validity, yields an average daily price of the MWh of electricity of about 130 or 140 euros, according to three independent experts consulted by this newspaper. That figure is not only less than half of the 283 euros on average in March, but also notably lower than the 180 ceiling for the wholesale market that the Government of Pedro Sánchez considered taking to the European Council in March and that he finally did not raise due to the reluctance expressed by the countries of the north of the Union, always resistant to measures of this type.
He knows in depth all the sides of the coin.
In a market with a marginal design like the Spanish one, the brutal rise accumulated in recent months by gas —which has increased fivefold in price— has contaminated the prices faced by consumers in a large number of hours: the most expensive technology (in many cases , gas) is the one that marks not only their own remuneration, but also that of the rest. And that is exactly what you want to tackle with this new framework. The compensations to the owners of the thermal power plants will come from the system itself, as Ribera has reiterated on several occasions, who has promised that it will not entail any burden on the General State Budgets nor will it increase the tariff deficit.
The development of what was agreed in March
At the end of March, the President of the Spanish Government, Pedro Sánchez, and the Portuguese Prime Minister, António Costa, obtained the political approval of the European Council for a mechanism that allowed them, hiding behind these low interconnections with the rest of the continent and their high share of renewables, stand out from the rest of the Member States with a specific and temporary regulation to lower the price of bills that have been through the roof for months. But this first framework agreement had yet to be grounded in concrete measures. That first fundamental specification of the pact is the one that has arrived now and that will allow the price of electricity to be separated from gas.
“The meeting was very constructive”, value community sources, who do not ignore that in the coming days the fringes of the agreement will have to be closed. These details and formalities will have to be ready before the Council of Ministers next Tuesday endorses the agreement with Brussels, according to Vice President Ribera. If that deadline is met, the long-awaited lowering of the invoice for customers of the regulated market (4 out of 10) should already arrive in the May invoice.