The electricity companies believe that the cap on gas will quintuple electricity exports to France | Economy
The so-called Iberian exception, the mechanism that empowers Spain to impose a limit on the price of natural gas used to generate electricity, will multiply electricity exports to France by five. With a substantial part of the neighboring country’s nuclear plant stopped and Spain generating cheaper energy with the gas cap, French demand for Spanish electricity will grow exponentially: the five terawatt hours (TWh) that would have crossed the Pyrenees north this year without the mechanism they will become 25, according to calculations by the employers’ association of electricity companies (Aelec). This amount is equivalent to 10% of the Spanish annual demand.
In a typical exercise —this one, for example, until the gas price limit came into force—, the cable that connects the Iberian Peninsula with the rest of the continent has a double flow: when it is windy and sunny in Spain and demand is moderate, exports are usually predominant; when consumption skyrockets and renewables do not provide enough, the enormous pulling power of French nuclear power plants turns that balance around. Although the upward trend in exports came from the past, this reality has been blown up in the first days of application of the gas cap: French electricity imports have disappeared and the flow is reduced to Spanish exports. A problem for Spanish consumers: the greater external demand raises both the internal price and the associated compensation to the top.
Gas generated electricity
The extra electricity that will be sold to France will come, almost entirely, from combined cycles, thermal plants that burn natural gas to obtain electricity. Unlike the neighboring country, Spain has a large idle capacity of these facilities, thought at the time as a key guarantee of supply at a time when renewable generation (much cheaper under normal conditions and exponentially cheaper since the outbreak of the energy crisis, in which gas prices have multiplied by between four and five times). “We are going to maximize our production with gas until the interconnection is saturated”, he emphasized. Peter GonzalezDirector of Regulation of Aelec, at a press conference held this Monday in Madrid.
The interconnection between Spain and France is very low compared to that between other European countries: it barely accounts for 2.8% of the total capacity of the Iberian system. That was the argument put forward by Madrid and Lisbon for Ursula von der Leyen and her team to give their approval to the mechanism and that is, today, the biggest brake on exports not growing even more: were it not for that physical limit, the flow would rise at an even higher rate, given the growing price gap between the two countries. The new submarine cable, which will link both countries through the Bay of Biscay, should come into operation in 2027 after years of delay.
No from Brussels to the double auction
To try to avoid the sale of subsidized energy to the neighboring country, the initial proposal from the Spanish Government to the European Commission went through a double appeal that would set two differentiated prices: one for the Peninsula and another for exchanges with France. Brussels, however, rejected it. After this refusal by the Community Executive, and in order to alleviate the negative effect on the pockets of national consumers, Madrid decided that part of the so-called congestion rents —which capture the difference in price between the two markets— would be used to compensate to homes and businesses. The result of that solution remains to be seen.
Beyond the Pyrenees, Spain has two other active interconnections: with Portugal and with Morocco. In both, Aelec foresees a smaller variation. In the first case, given that the cap on gas will be applied throughout the Peninsula, the balances will remain as before: there will be import days and export days in the Iberian market. In the second, the net result will not vary much either: “Until now we had a purely export balance, which will increase. What happens is that the relevance of the two links [con el país africano] it is not as big as the French one,” says González.
Savings on the rise
The electricity employers calculate that the gas cap has led to savings of slightly more than 11% in the first four days since its activation. The first two days -Wednesday and Thursday-, in which the high temperatures triggered consumption and renewables were far from their usual records -little wind, haze and a lot of heat, which reduces the efficiency of solar panels-, were the days lower savings: 6%. On Friday and, above all, on Saturday, when these conditions began to disappear, the reduction caused by the limit on the price of gas rose to 11% and 22%, respectively.
“It is difficult to assess the savings of the first days: it has been an atypical period, in which a very high demand and a high compensation have coincided. We should start to see some savings increase this week, when temperatures will drop substantially. Will it reach 30% [previsto por el Gobierno en el mercado mayorista]? It is difficult to know yet, ”González settled.
Asked if the expectations of a reduction in the invoice handled by the Executive of Pedro Sánchez (a drop of between 15% and 20% in the invoice of clients of the regulated market) will be met, the head of regulation of Aelec has preferred not to pronounce: “It will depend on the weather conditions, the renewables and the price of gas. The savings we have seen have been lower than expected, but in recent days they have risen and will continue to do so”.
