The succession of records in the price of electricity this week has become as irreversible as the date change on the calendar. Every day new heights have been reached, up to the peak of 117.29 euros that is expected this Friday, the latest turn of the screw in a crisis that affects homes and businesses, and that threatens to wear down the Government. Neither the VAT reduction from 21% to 10% approved by the Executive, nor the calls to Brussels to redesign the energy market have served to contain runaway prices due to the rise in natural gas and CO₂ emission rights, two matters over which the Government does not have the capacity to influence.
In this scenario of increasing pressure in which it is possible that high prices will last for months, the Minister for the Ecological Transition and the Demographic Challenge, Teresa Ribera, opened the door for the first time, during an interview this Thursday in Cadena SER, to modify the market rules to dispose of “all hydroelectric energy through a concession system, through a public company, as the hydroelectric concessions are released, which allows to intervene or facilitate another way of offering energy ”.
The solution of having a public company that brings together the hydroelectric concessions when the private management ends, a habitual demand of United Podemos, its partner in the Government, had until now been rejected from the socialist side of the Executive. Podemos, on the other hand, insisted that the current model works in a defective way, and has repeatedly blamed “the marginalist auction system created by the Government of Aznar”, where the final prices of electricity sometimes have little to do with the costs of its generation. The secretary general of the purple formation, Ione Belarra, has celebrated the socialist turn. “That the PSOE opens for the first time to our proposal to create a public energy company is good news. We must face with urgency and courage the critical situation of the exorbitant price of the electricity bill, “he wrote on the social network Twitter.
Francisco Valverde, head of Renewables at Menta Energía, believes that the idea is good, but not its execution. “It is not necessary to create a public company. It would be enough for the renewal of the concessions to tender only the maintenance of the plants and the generation to be managed by the system operator (Red Eléctrica) with the prices necessary to cover only that maintenance cost. In this way, the management of generation would be to benefit the entire electrical system and not only for the profit of companies ”.
Other analysts consulted agree that a solution would be to put some kind of restrictions as the concessions expire. For example, setting maximum prices or bidding only for plant maintenance operations to leave their management in the hands of the State, an option similar to that proposed by the vice president with the creation of a public company.
In this way, the strategy would cease to be profit maximization pursued by private companies, and would become technical criteria such as storage and the public interest for the benefit of the system. Experts warn, however, that breaking the concessions before they have expired could lead to a cascade of lawsuits and would bring legal uncertainty. In addition, they point out that a measure of this type would help to relax prices, but would not solve the escalation that is being experienced in recent weeks, which is affecting all European markets and that will foreseeably continue until next year.
The creation of a public company does not appear in the government agreement between PSOE and United We Can, but the limited margin of action of the Executive to lower prices is pushing it to consider alternatives until now prohibited. “We continue to seek solutions to minimize the impact on consumers,” Ribera assured. Of course, without believing that the issue will be resolved in one fell swoop. “This does not have a single solution, nor is it resolved with a mobilization in the street,” added the minister, referring to the possibility that her government partner may demonstrate against the rise in the price of electricity, as Pablo Echenique has hinted, parliamentary spokesperson for United We Can. Ribera considers that purpose as little useful as protesting against the rise in oil, a raw material whose price depends on international investors and not on the Administrations.
In today’s wholesale market, which is known as pool and is based on an algorithm designed for the whole of Europe, a different price of electricity is set for each hour of the day based on demand. By virtue of this system, companies present their sales offers, which are matched with those of demand and are ordered from cheaper (such as renewables, which use natural resources at zero cost) to more expensive (fossil fuels, such as gas ). The meeting point determines the price of electricity for each hour of the day, and all plants are rewarded based on the price set by the latest technology that enters the market – the most expensive – to meet demand.
This system generates what are known as windfall profits, or profits fallen from the sky, which generates extra remuneration and far removed from the production costs for certain technologies. Among them are hydroelectric plants, which also have room to drain when it suits them best. That is, they can sell when the price is higher. This strategy is known as opportunity cost, and until now the private companies that hold the dams have operated almost without limits. Despite using a natural resource such as water and having amortized plants, they end up setting the price of gas.