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Ribera’s pact with Brussels leaves the price of electricity at 150 euros/MWh | Companies

After a difficult negotiation with Brussels, Spain and Portugal have achieved a relative victory in their battle to apply a mechanism that allows a drop in the prices of the Iberian electricity market (Mibel). The so-called “Iberian exception”, based on the scarce interconnection of the peninsula with Europe (barely 2.7% of capacity) and the significant development of renewables in both countries, was accepted a month ago by the European Commission, consisting of put a limit on the price of gas offers (or, as the case may be, coal) to generate electricity, to lower (or contain) the marginal price set by these more expensive energies and from which the rest of the technologies benefit (nuclear, hydraulic or renewable).

After the meeting held today by the Vice President for the Ecological Transition, Teresa Ribera, and her Portuguese counterpart, Duarte Cordeiro, with the Commissioner for Competition, Margrethe Vestager, an agreement was reached, which was about to capsize, because on the night of yesterday, everything was open, according to industry sources. The preliminary agreement launched to great fanfare by the presidents of Spain, Pedro Sánchez, and Portugal, Antonio Costa, at the end of March, lacked the fine print, and this has resulted in a less conclusive victory for the Iberian countries. Faced with a price of 30 euros/MWh that they had requested as a limit for gas (knowing that Brussels would push higher), which would have translated into a wholesale market price of around 100 euros/MWh, Spain and Portugal have achieved that the ceiling is set at an average of 50 euros/MWh, starting at 40 euros and gradually rising within a year in which the measure will be applied.

This price is obtained by multiplying by two the average 50 euros/MWh agreed for gas, to which must be added the cost of the CO2 emission rights that the combined cycle plants must pay (which yesterday traded at 85 euros/ ton) multiplied by 0.4 and to which some 12 euros are added for other plant costs. Considering that the price of pool so far this year it exceeds an average of 283.3 euros/MWh and that this is the price paid in Spain by consumers covered by the regulated tariff (PVPC), it will be a benefit for these users. Even with everything, well above the wholesale price between January and April of last year, which ended with an average of 49.78 euros/MWh, before the maneuvers of Russia to raise gas prices, which have been exorbitant after the bloody invasion of Ukraine last February.

There will be no double auction

But the most important change with respect to the initial proposal by Spain and Portugal to intervene in the Iberian market has been Brussels’ refusal to admit a double price through two auctions, one with the price limited to the peninsula, and the other without said cap. , for France.

The most important problem faced by this mechanism is “export pressure” towards France as the Iberian market recorded lower prices. But, contrary to what has been implied, these will not be subsidized by Spanish and Portuguese consumers in favor of the French, but the French marketers will also pay the compensation: they will buy at the “cast” price, but they will compensate the gas like the Iberian marketers. Because the limit on the price of gas is only established in order to avoid a very high marginal price, but the real price of the cycles will be paid equally, through a proration between the rest of the energies that “demand” will pay: the marketers, which they could pass it on to clients in the free market, except for those of reference that they supply to regulated clients.

Spain and Portugal have given in to Brussels because, in addition, the double auction system and, therefore, double price, created a serious technical problem in the liquidation of futures market hedges, as you had denounced these days, the operator of the Míbel futures market, the Portuguese Omip (the Spanish, Omie, deals with the daily spot market), as well as the clearing houses of said markets BME Clearing and MEFF. The great beneficiaries of maintaining a single price are the combined cycles, which will increase their production due to greater demand from France.

As Ribera confessed yesterday after the meeting with Vestager, “the European Commission has asked us to be flexible so as not to put limitations on the border, “but obviously, the French consumer will have to pay the same as the Iberian consumer in this adjustment.” For its part, Brussels “has committed to being much more active in monitoring full compliance with an interconnection target set for 10% in 2020 and 15% in 2030,” the vice-president added.

In exchange for giving in to its proposal to hold two auctions, Spain has managed to ensure that the term of application of the mechanism is not until the end of the year, but 12 months. The mechanism will be included in a royal decree law that will be approved by the Council of Ministers next Tuesday.

Competition and state aid

  • RDL. The last leg of a complicated negotiation was waged between the Vice President for the Ecological Transition, Teresa Ribera, her Portuguese counterpart, Duarte Cordeiro, and the Competition Commissioner, Margrethe Vestager, who held the final meeting yesterday. The agreement, whose content will be known this week, and will be included in a royal decree law that will be approved by the Council of Ministers next Tuesday, would have an immediate effect and will be noted, according to Ribera, in the electricity bill for the month of May.
  • Helps. The culmination has been carried out by Competition, and not by Energy, because the “Iberian exception” is part of the guidelines that Vestager prepares to allow countries exceptional, direct or indirect State aid (such as the Iberian agreement) and for amounts Similar.
  • electrical. The mechanism has been harshly contested by the Spanish electricity companies, who have put pressure on Brussels this time. Finally, it will go ahead and it will be difficult for them to win a lawsuit in court, since it has the approval of Brussels, which, from the outset, would never denounce a measure even if it did not comply with the regulations on State aid.

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