Since last friday Spain has begun to feel the effects of the storm Filomena, that is hitting the country in the form of cold, wind, rain and snow. Fruit of it, national households will increase their energy consumption, which will increase the electricity bill, whose price has increased by 27% in this beginning of 2021. A article published in The countrys details some of the reasons that explain the increase in price of the mentioned product.
Why is its price increasing?
Renewables have increased their participation in the energy mix and they are cheaper than those that use fossil fuels. But now, as the aforementioned medium explains, less solar energy is being generated, which forces the market to use more expensive energies such as those that produce coal-fired or combined-cycle power plants.
How is its price set?
It is done by a matching process in which both electricity generators and trading companies participate. In it, they launch their offers each day for each hour of the following day. So, the balance between supply and demand is what sets its price. However, the final price paid to all plants it is determined by the last supply that meets the demand.
As noted The country, there are two factors that fully impact in the energy market: decrease in renewable energy production and higher demand. Due to this, the cheaper energies do not cover the rising demand, which forces other more expensive and it has an upward impact on the price.
Gas and emission rights
One of the factors that is raising the price of energy the most is the increase in the price of gas. There are some conditions that explain it: reduction in imported gas from Algeria, the highest demand in all of Europe due to the cold or the pull of Asian countries. In addition, CO₂ emission rights are rising and utilities include it as a extra cost added.
How is the cost transferred to the invoice?
The increase in the price of electricity does not translate into an increase of the same intensity on the electricity bill. This is because its consumption comprises between 35% and 40% of the bill.
What does the rest of the receipt include?
The rest of the bill is consisting of the fixed costs of tolls, VAT and electricity tax. In addition, the indicated average points out another prominent factor that influences the cost of the receipt: the rate contracted by each consumer, which can be regulated or free market.