Spain may set a maximum price without counting gas

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It seemed like a taboo subject, but at last the European Commission has agreed to change the current marginalist system of prices in the energy sector and temporarily decouple it from the price of gascompletely out of control due to the war with Ukraine.

so it has announced Ursula von der Leyen, President of the European Commission: “We have to act now to mitigate the impact of rising energy prices.” In the new REPowerEU plan, a series of measures are outlined to respond to rising energy prices and diversify gas supply. Measures that, for the first time, include regulating the price of the energy system and set a maximum price.

How the electricity market works and why, despite the fact that the price sometimes reaches zero, it will barely affect our bill

Limiting the price of energy is finally officially on the table

The peculiarity is that Spain had a matching limit for the electricity pool of €180/MWh, but in 2019 it was extended to €3,000/MWh to harmonize the market with neighboring countries and move towards the creation of a single energy market. Then the limit of Spain seemed crazy, but it has been clearly outdated with the enormous rise of these last weeks.

Now the European Commission accepts the measure proposed by countries like Spain and admits that it will allow putting a maximum price on the price of energy, despite the fact that if gas is taken into account, it should be much higher. A much lower limit than the current €3,000/MWh in the daily market or €9,999/MWh in the continuous intraday market, which are still an almost technical limit to avoid specific irregularities. This limit has not yet been specified. The European Commission will provide more details in the coming weeks..

If last autumn measures were taken such as the reduction of taxes and state aid, now the European Commission proposes a new round of measures, among which it is included, for example, that It must be guaranteed that underground gas storage reaches a minimum of 90% of its capacity for October of each year (and thus be able to have sufficient reserves for winter).

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The Commission explains that “all emergency options are open in order to limit the contagion effect of gas prices on electricity prices, such as temporary price limits“Here they are quite cautious and will request reports from the Agency for the Cooperation of Energy Regulators (ACER) to avoid possible inconveniences, such as price disparities between different countries and inequality being generated.

This set of recommendations from the Commission collects all requests from countries like Spain, where the price of gas ends up marking the price of energy despite the fact that in Spain its weight is considerably lower than in northern Europe. It is not yet known how this maximum will be implemented. Fortunately, it is already an officially contemplated option.

Image | Anton Romko

It seemed like a taboo subject, but at last the European Commission has agreed to change the current marginalist system…

It seemed like a taboo subject, but at last the European Commission has agreed to change the current marginalist system…

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