The wholesale electricity market will take a break on Friday, ahead of the weekend, when prices tend to relax due to lower demand. But it will continue at skyrocketing levels. The megawatt hour (MWh) will be slightly cheaper after four consecutive days breaking records and will stand at 137.70 euros, according to data from the Iberian Energy Market Operator (OMIE). It is a figure somewhat lower than that of this Thursday, when the historical maximum peak of 140.23 euros per MWh has been reached.
This Friday, the most expensive time will be between 9:00 p.m. and 10:00 p.m., with 147.57 euros per MWh, while the section between 4:00 p.m. and 5:00 p.m. will be the cheapest, with 119.42 euros. Electricity prices started to rebound strongly in May. June closed with a monthly average of 83.3 euros per MWh in the wholesale market and everything indicated that in July it had peaked at 92.42 euros. But in August, prices grew again dramatically, becoming the most expensive month in history to date with an average price approaching 106 euros per MWh.
This upward spiral is largely explained by exogenous elements. The price of gas in international markets has skyrocketed compared to 2020, in which prices were on the ground due to the drop in demand caused by the pandemic. If a year ago the Title Transfer Facility (TTF), a European reference center, moved at 13 euros per MWh, now it flirts with 50 euros. A colder-than-anticipated winter that has emptied reserves, the economic reactivation led by China and Russia’s supply restrictions are the main elements that have unleashed this escalation.
The average price of gas in the Iberian Market (Mibgas) was 44.21 euros per MWh during the month of August, which represented practically multiplying by five the price of the previous year. This is revealed in the latest GasIndustrial market price bulletin, corresponding to the period from July 24 to August 27. Compared to July, the rise was 21.2%. On a European scale, the monthly increase was 18.7%, with an average price of the European centers of 41.86 euros per megawatt hour.
CO₂ emission rights are the other variable that puts pressure on prices. These are listed on a market created more than three decades ago by the European Union, with the aim of discouraging the most polluting energies. Brussels’ decision to withdraw rights from the market at a faster rate, to accelerate the transition to cleaner energy – to which analysts add the speculation factor – has skyrocketed its price. From 25 euros per tonne a year ago, the price has already reached 60 euros.
According a report published this August by the Bank of Spain, about 20% of the increase in electricity prices in the wholesale market is explained by the increase in the cost of CO₂ emission rights, since it is transferred directly to the costs of generating electricity through technologies that use fuels fossils. “However, most of the increase – approximately half – would come from the increase in gas prices, a raw material used by combined cycle plants,” the report noted.
These strong rises have also triggered the political tension between the Government partners. The Executive decided in June to approve a VAT tax reduction and the suspension of the electricity generation tax to alleviate the impact of the increase in the receipt of the more than 10 million consumers who have contracted the regulated rate, known as PVPC, in the which the price paid for energy depends on fluctuations in the wholesale market. At the same time, it has called a new renewable energy auction and has implemented several structural measures – limiting the excess remuneration of non-emitting plants, basically nuclear and hydroelectric, and the creation of a fund to remove the cost from the receipt. from premiums to renewables – to mitigate the blow to households, which have begun their processing in the Courts.
United We can, however, has asked to take more drastic measures with the establishment by decree of a maximum price for hydroelectric energy and a fixed one for nuclear energy, measures that the Ministry for the Ecological Transition, led by Teresa Ribera, considers contrary to the regulations. European standards, which are what determine the functioning of the market for all EU countries. This same Thursday, Podemos has added gasoline to the fire by promoting a bill in Congress to create a public energy company.