Spain ends the week with the cheapest electricity in its history Economy

Nearly three years after the first bends in energy markets – which ultimately culminated in the Russian invasion of Ukraine through Europe’s largest sectoral crisis – Spain’s electricity system is recording the cheapest seven days in its history. The wholesale price of electricity is set to close the week at 4.53 euros per megawatt hour, the lowest figure since records began. 4.66 euros have disappeared from the second edition of April 2013 – which was the cheapest in the entire historical series so far – and also 6.72 euros from the last edition of March of the same year, which was late.

The reasons that explain this significant drop in prices are primarily two reasons. The first and most structural, which has been ongoing for weeks, is the collapse in natural gas prices and CO2 emission rights, putting downward pressure on the entire market in the hours when fossil fuels start to price electricity. The second, which is temporary but particularly important in this weekly series, has to do with weather maps: strong wind gusts have activated wind energy in an unprecedented way; The sun maintained a good PV tone in many sections of the day; The recent rains witnessed in the most important basins allowed the hydroelectric stations to operate at a much higher rate than the average during the recent period of drought. The relationship is clear: the more renewables in the system, the lower the price of electricity.

This Sunday, the wholesale price of electricity will be zero euros for most of the day: between 1 a.m. and 6 p.m., according to figures released by the Iberian Energy Market Operator (OMIE). These will be the hours when total renewable and nuclear generation – whose production is slowing due to pressure on wind and photovoltaic power – will greatly exceed demand. Where the links will be with France, Portugal, Morocco and Andorra in an unambiguous export sense. A very similar pattern for almost every day this week.

Households in PVPC, benefit the most

Not all consumers benefit immediately from this unprecedented drop in prices. Those who have seen their bills fall significantly for several days are just over eight million households and small and medium businesses covered by the regulated market, or PVPC, the price of which largely depends on the wholesaler. In your case, the reduction is immediate. For the rest, those who choose the free market – often with fixed interest rates – the break will only come when it is their turn to replenish or when they decide to switch to the regulated market.

In fact, the recent decline in electricity prices exceeded the expectations of the government, which in its decree on anti-crisis measures stipulated that the value-added tax on electricity be reduced and that the wholesale market price remain above 45 euros per megawatt hour. In February, it actually closed below that level, and March, April and May point in the same direction, according to futures markets. It is a powerful disinflation factor, which was already felt in the February data, and which also allows a respite in public accounts.

The general feeling in the sector, nearly 11 years after the last record low prices, is that it will be much lower until a new price is broken. The data supports this impression: while electricity demand has remained practically stuck at the same levels as a decade ago, renewables, the cheapest sources of generation of all, have grown – and continue to grow – dramatically. Especially solar PV, prices fall in the middle parts of the day.

Even if it is overcome, which it will be, a series of low prices like the one seen this week will not be sustainable in the long term. First, on the meteorological issue: the combination of wind, water and sun that has occurred in recent days has been unusual. Secondly, because all models point to increased demand in the near future, as the electric car and geothermal energy reach homes, and industry converts consumption that has become fossil today to electric. Thirdly, and no less important, because practically no generating plant – neither currently nor in the future – is profitable at these prices.

February was already the cheapest month as there are records for those who opt for the PVPC system, where electricity companies’ margins are pre-determined and the price of electricity varies hour by hour and day by day. In the second month of the year, the fair price of €40 per MWh on the Spanish wholesale market represents a decline of almost 70% compared to the previous year and 33% and 29%, respectively, compared to Germany and France, the two largest consuming countries. Centers of the ancient continent.

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