October 22, 2021

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Switches of electricity rise in Spain: what factors affect the price

Switches of electricity rise in Spain: what factors affect the price

Electricity rush can increase shops bill by 50%. Photo: The Courier

The price of electricity recorded five consecutive historical highs this week. something historical. But for the bad. This Thursday, the Minister for Environmental Transformation, Teresa Ribera, acknowledged the government’s limited ability to do something in the short term. External factors influence the increases and you expect that there are days, weeks and months left Electricity will have a lot to talk about.

But why does the light shine? Standard prices these days are wholesale market prices. This refers to the amount that the marketers pay, i.e. the companies that supply homes with electricity that pay the bill. The price is determined by a daily blind auction. Marketers’ bid determines what they want to buy and what they are willing to pay; Producers say how much energy they sell and at what price. OMIE (the operator of the Iberian energy market, which operates the markets of Spain and Portugal) joins the two and the resulting amount is an amount set in 24-hour intervals the next day.

The resulting energy generated is called the electrical mixture. From renewable sources and nuclear power plants to coal-fired thermal power plants or combined cycle plants goes there. The latter uses fossil fuels, and when it is necessary to produce the electricity required at a particular time, they increase the price.

In fact, the increase in prices in the wholesale electricity market is due to several factors, among them the strong revaluation of natural gas in international markets, the rise in the carbon dioxide market and the increase in market prices. It increased by over 100% in just six months.

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Added to all this is the increase in temperatures that will exceed 40 degrees Celsius in various parts of the country, causing a recovery in demand.

How long will it last at its highest levels? Futures markets anticipate that light will remain expensive for a long time. Although talking about price caps is another matter, like this week. The heat wave contributed to this, as it leads to an increased demand for the use of air conditioning, and at the same time, lower winds lead to the generation of less wind power. The current high streak could be cut this Saturday, as a dip in industrial demand on the weekends favors cheaper prices. But if the heat continues, it is not excluded that on Monday the market will return to its old ways and hit highs again.

Increase in summer and winter

Summer and winter twice when the price of electricity rises. It is typical, on the one hand, that consumption is higher, plus other factors such as weather combine, affecting power generation.

As we can see, in the past three years, we have had a cheaper average price in winter for two years and in summer for one year. If we look at it, the December and January data during 2016-2017 are extraordinarily high, due to lower temperatures and increased consumption.

Looking at the numbers, we can conclude that, in general, although not accurate, the answer to when electricity is cheapest will be winter most of the time. However, we must take into account an important effect.

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As we recently mentioned on the same site, there is a general increase in prices for the Spanish electricity market. In other words, the trend in electricity prices has been one of the significant increases in recent years. This is something we can also appreciate with the numbers we’ve seen.

This means that if you calculate that summer occurs after winter during a calendar year, then naturally summer is more expensive most of the time. The general effect of electricity price increases over time is contributed by the fact that winter is in most cases somewhat cheaper.
Is creating a public company the solution?

In her speech, the Vice President opened the door to establishing a public company to manage the hydroelectric concessions that are being liberalized, in order to reduce the rate of electricity. Thus, he indicated that there would be the possibility of “all hydropower being acquired through a different concession system or through a public company with the hydroelectric concessions liberalized, allowing to intervene or facilitate another way of delivering energy.”
The Light sets a fifth straight record on Friday and Ribera plans to overhaul the rates.

However, he stressed that the rise in electricity prices in the wholesale market “does not have a significant impact on domestic consumers,” and noted that the government had already taken measures to lower the bill, such as reducing value-added tax.

(taken from EL Correo)