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The price of electricity is still unleashed: it will exceed 400 euros per megawatt in the central hours of the day

The wholesale price of electricity will reach a new record tomorrow, Thursday, with an average of 383.67 euros per megawatt hour (MWh), which is 23 euros more than this Wednesday, 6.5% more from 360.02 on Tuesday. This new rise reflects an unstoppable rise, in line with that experienced by natural gas. The maximum price for time slots exceeds 400 euros for the first time (stands at 409 euros) and will take place between 6:00 p.m. and 8:00 p.m. In fact, between eight in the morning and 10 at night it will be above 400 euros MWh. The minimum price will be 303 euros at three in the morning.

With this new level, there are already eight days in a row that the wholesale price of electricity has been above the 300 euros and the experts predict that it will not fall below its current scales due to the increase in the cost of natural gas and CO₂ emission rights. Looking at the futures, everything indicates that, except for a sharp turn, December will close as the most expensive month in the entire historical series, exceeding the value of October (199.9 euros MWh). As a consolation, this escalation extends throughout Europe, with prices higher than those of Spain in some countries such as France (416.44 euros on average) or Switzerland (403.19). In Germany, which this Wednesday was above, for Thursday it falls to 300.73. Poland remains lower, with 218.13 euros MWh.

The Minister for the Ecological Transition, Teresa Ribera, blamed the electricity price records in Spain on Wednesday for the increase of the demand from France, a country with which there is interconnection, which has closed four nuclear power plants, a third of its system. “This Wednesday's record will unfortunately be surpassed as a result of the increased demand for electricity that France is needing, given the closure of a third of its generation capacity for safety reasons in terms of its nuclear power plants.” Ribera said during his speech in Congress. And he continued: “This implies that the maximum possible electricity will be exported in the interconnections with the neighboring country, thus impacting the price of the Spanish wholesale market and the demand for natural gas.”

Ribera insisted that France currently needs to transfer the maximum capacity of the interconnections, which impacts the demand for electricity in Spain and pushes up prices.

Seven times higher than a year ago

Current light values ​​are seven times higher than a year ago, when they were around 50 or 60 euros on average per MWh. According to an analysis by Facua-Consumidores en Acción, if the rates remain so high for the remainder of the month, the last bill of the year would reach 134.45 euros for the average user, 94.1% above the 69.28 December 2020 euros.

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The wholesale market price affects the bill of the 10.7 million users who have a regulated tariff (around 40% of the total, the rest is in the free market with revisable contracts). Until November, electricity for home users was 47% more expensive than a year ago.

In addition, the futures curve indicates that prices will remain above from 300 euros to throughout the first quarter of 2022 and will begin to decline from April, although the average from that month will be between 180 and 200 euros MWh, that is, an exaggerated price compared to what is customary in past years. The main cause is the shortage of natural gas, a sector in which production is not increasing despite the higher demand, and of CO₂. According to experts, the only reasons for these high gas prices are due to geopolitical issues, increased by tensions between Russia and Ukraine, and to speculation by investment funds, in the case of the emission rights market.

The Council of Ministers approved on Tuesday to extend the term of the measures to curb the impact of the wholesale market price on electricity bills, as well as to promote mobility and self-consumption. In this way, the VAT reduction from 21% to 10% and the electricity tax from 5.11% to 0.5% is maintained until the end of April, as well as the elimination of the electricity generation tax, from 7% , in this case until the end of March.

However, the reduction on the fixed charges of the receipt will be much lower than in recent months: from 96% it will go to little more 30%, according to the proposal of the Ministry for the Ecological Transition. The coverage for vulnerable groups that benefit from the electricity social bonus, which includes discounts of up to 60% and 70% on their electricity consumption, will also be maintained until April 30, 2022.

The tax reduction will have an impact on public accounts of 2,000 million euros, according to the Minister of Territorial Policy and Government Spokesperson, Isabel Rodríguez. This figure is added to the 4,000 million that have been stopped collecting since the measures were taken. They will be partially offset by the increase in CO₂ rights, which are estimated at around 2,500 million, according to government sources.

Employer support

The Association of Electric Energy Companies (Aelec), which groups together the traditional electricity companies (Endesa, Iberdrola, EDP and Viesgo), has supported the measures approved by the Government to extend the tax reduction and promote electric mobility, self-consumption and the deployment of renewable energies. In a statement, the electric power association describes the impact on consumers (especially the most vulnerable) as "positive", ensuring the financial and economic sustainability of the electricity system.

Regarding self-consumption, the association believes that the new legislation applies new "more favorable" criteria, with improvements in the economic conditions of the projects. Likewise, it celebrates the elimination of barriers to streamline administrative procedures for the deployment of the charging infrastructure and the commitment to the development of a greater number of parking spaces with charging points for electric vehicles.

It also highlights "the drive to digitize electricity distribution networks", allowing over a period of three years to mobilize investments for more than 1,000 million euros.

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