This week the coalition government and Brussels have reached an agreement to extend the cap on gas until the end of the year, an agreement that came into force more than nine months ago. Thanks to this mechanism, households have been able to save close to 17% on the wholesale price of electricity and place Spain at significantly lower levels than its neighboring countries.
According to the data compiled by EFE, between June 15 and April 1, electricity was paid on average in the wholesale market at 173 euros per megawatt hour (MWh), which represents a figure close to 17% lower compared to with the 207.8 euros/MWh that would have been reached if the gas cap were not in operation.
Of the total price, 120 euros that use that material to generate electricity.
Light is cheaper than in Europe
Compared with the main European economies, the gas cap has allowed Spain to have systematically prices that are clearly lower than those of Germany, France and Italy. Since the gas cap came into force, Italy has registered an average price of 293 euros/MWh, 69% more than the Spanish price, with peaks of 740 euros/MWh in August.
France, affected by the prolonged stoppage of its nuclear generation park, has paid for electricity 51% more expensive than in Spain, with an average of 260.7 euros/MWh, which has led it to exponentially increase its exchanges through of the Pyrenees. For its part, Germany, which has traditionally been the European power with the lowest prices, has seen how its dependence on Russian fossil fuels has led it to pay for electricity at an average price of 230.1 euros/MWh, a 33 % more than Spain.
Little effect so far this year
Despite the evident positive effects that the cap on gas has had to stop the escalation of electricity and moderate the evolution of inflation, the so-called Iberian mechanism is becoming less important, since the fall in the price of natural gas does not your application is necessary.
The cap on gas has not been applied for 34 consecutive days -all of March included- and adds up to 40 days so far in 2023, due to the fact that the price of this raw material on the Iberian Gas Market (Mibgas) has been maintained at all times. below the maximum price established by the Government. Between February and March, the gas cap has not been applied on two out of three days, which has meant that its influence on the wholesale market has been rather scarce, as the Government itself acknowledges.
“If the current price context stabilizes, it is true that the effectiveness of the Iberian mechanism is relegated to a secondary level, since, when natural gas prices are below the threshold set by the regulatory instrument, the effects of the Iberian mechanism on the marginal matching processes in the wholesale markets are null”, ensures the text approved by the Executive.
On the contrary, the month in which the gas cap had the greatest effect was December, when it reduced the price of electricity by around 35%, with an average of 134.6 euros/MWh compared to 207.6 euros/ MWh that would have been paid for without this tool.
Extension throughout 2023
Even so, the Executive announced this week an agreement with the European Commission to extend the cap on gas until the end of the year, in even more favorable terms that will allow consumers to be protected for next winter. In this sense, the First Vice President and Minister of Economic Affairs and Digital Transformation, Nadia Calviño, defended this week that the extension of the gas cap will have a “safety net” for consumers in the coming months.
“The Iberian mechanism itself would provide coverage for consumers in the event that natural gas prices increase again due to factors unrelated to the supply and demand of the energy product itself,” the regulation indicates.
For the remainder of the year, the Government and Brussels have agreed to apply a longer increase in this mechanism until reaching a maximum price of 65 euros per megawatt hour (MWh) in December.
In this sense, for April, when the ceiling was expected to be 60 euros/MWh, the maximum price will finally be 56.1 euros/MWh, and in the following months the reference price will increase by 1.1 euros. except in the case of August, when the increase will be 1.2 euros. Until now, the mechanism established a cap on the price of gas used to generate electricity in the wholesale market, which started at 40 euros/MWh and since January has increased by five euros per month.