The greater contribution of wind power to the generation mix allows lighting the oven or Christmas decorations to be practically free this Saturday
It seems almost a lie. After more than a year and a half with the electricity market completely disrupted, we Spaniards will say goodbye to the last day of 2022 with the price of electricity at its lowest at the end of January 2021. Moreover, at dawn, energy prices in the wholesale market they will be zero euros. That is, totally free, a situation that has not occurred since March 2014 according to historical records.
In total, the price of electricity for customers covered by the regulated tariff (PVPC) will plummet to 1.82 euros per megawatt hour (MWh), according to the prices set in the wholesale market (2.65 euros per MWh, according to the operator Omie) and the adjustment to be paid by the beneficiaries of the gas ceiling.
At five in the afternoon, it will barely exceed the euro per MWh. So it is convenient to switch on the oven a few hours earlier for New Year’s Eve dinner, since from seven in the evening the maximum price of the day will be registered, at only 20 euros per MWh.
Behind the drop in prices in recent days is the greater contribution of wind power to the energy generation mix. But the fact that the price in the wholesale market reaches zero euros next morning does not really mean that electricity will be completely free for the consumer.
It must be taken into account that the invoice not only influences the auction price, but also other fixed costs such as taxes and tolls. Free market customers do not benefit from this situation either, since their price is the one agreed with the electricity company at the time of the contract.
Despite this, this abrupt turnaround is surprising in a market that has suffered almost unusual months. Specifically, the average price for regulated rate customers linked to the wholesale market exceeds 209 euros this year, the most expensive since records exist and almost doubling the 112 euros registered on average in 2021. It must be remembered that August was the month with the highest prices in the entire historical series, with the average for the period approaching 310 euros per MWh.
Iberian exception
In the absence of the mechanism of the ‘Iberian exception’ to cap the price of gas for electricity generation, the price of electricity in Spain would be around 40.41 euros on average, which is around 38.6 euros per MWh more. than with compensation for customers of the regulated rate, who will thus pay 95.5% less on average.
The ‘Iberian mechanism’, which came into force on June 15, limits the price of gas for electricity generation to an average of 48.8 euros per MWh for a period of twelve months, thus covering next winter, a period in which energy prices are more expensive.
Specifically, the ‘Iberian exception’ sets a path for natural gas for electricity generation from a price of 40 euros per MWh in the initial six months, and subsequently, a monthly increase of five euros MWh until the end of the measure.
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