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Gas Price In Spain Has Multiplied By Five Since August 2020

BySam Brad

Aug 26, 2021

The price paid for electricity in Spain has once again become one of the most recurrent news that is being talked about in recent weeks, and it is no wonder.

If in January it was already a cause for concern when prices timidly exceeded 100 euros per MWh, in the midst of a cold wave that hit our country, in August prices have easily exceeded those levels, reaching 122.76 euros per MWh to be paid today for electricity , a new record in Spain, according to data from OMIE, the designated electricity market operator.

The price of gas is skyrocketing
The final price paid for electricity in our country cannot be explained with just one variable, since there are many factors that intervene in the equation (the cost of the raw material, taxes, the way in which they are established prices in the wholesale market, power generation with renewable sources, but at this moment, one of the components that is most affecting electricity prices is the price of natural gas , the raw material that It is used in combined cycle plants, facilities that consume gas to generate energy.

The electricity companies that manage these plants pay the price set by the market, and the increase has been meteoric in the last 12 months: in August 2020 the average price of gas was 9.39 euros per MWh; twelve months later, almost 5 times that amount is being paid, since currently the price of the raw material is 45 dollars per MWh.

Ours is not an isolated case: it has also occurred in other international markets, to a greater or lesser extent. In the American, for example, the price of gas has multiplied by 2.6 times in the last 12 months, an increase that Natural Gas Intelligence attributes to high temperatures due to the increase in demand that it brings. If in January gas prices shot up due to the cold wave, now it is the heat that is responsible for the increase in consumption.

Less renewables, more gas
A more expensive gas is not the only factor that has to be given to raise the cost of the electricity bill in our country. In addition to the rise in prices, it is necessary to take into account the composition of electricity generation according to the different technologies used.

If the percentage of generation is higher by the combined cycle plants, a more expensive gas has a greater impact on the bill, something that has been happening in recent days. It must be remembered that renewable energies such as wind or solar, which according to data from the Organization of Consumers and Users (OCU) are responsible for the lowest prices when setting the price of light, have the disadvantage of depending on weather conditions for your generation.

Naturgy sources explain how “combined cycles are having a greater weight in recent days due to the heat wave.” The reservoirs are lower than usual, with the average of the last 10 years remaining at 58% of their total capacity, compared to 43.96% in those that remain at this time. The reservoirs have been reduced by 1.4% in the last week, and are below the 52.1% of their capacity in which they were maintained 1 year ago.

From the Spanish company they highlight how “there is not much generation of wind energy at the moment” , with only 13% of the total yesterday, according to the data provided by Red Eléctrica. In addition, the company stresses that, for the moment, “photovoltaic energy does not have a significant market share in our country.”

Although in recent days gas plants have had a notable impact on the formation of energy prices, it is a type of generation that in recent years has been losing weight for companies in the sector, and is only activated when the system requires it. Legislation obliges them to remain available in the event that Red Eléctrica requests their production.

Last year, the Aelec association, made up of EDP, Endesa, Iberdrola, Naturgy and Viesgo, asked the government to allow the temporary closure of the idle generation plants , those of gas, without any type of remuneration. The request to keep them temporarily stopped, as long as they are not necessary, has not received a response, according to sources in the sector.

The cost of CO2 emissions doubles
Another factor that is affecting the price of energy is the increase in the cost of carbon dioxide emissions. Companies that emit this greenhouse gas for their activity (such as a combined cycle plant) have to pay a price in Europe that is negotiated on the market.

Emission rights are listed, and those paid in Europe have gone from 28 euros per tonne, in August last year, to 56.2 euros today, an increase of more than 100%.

Sam Brad

The Great Writer and The Passionate Poet As Well, He Graduated from University Of Florida in Journalism and Brad have around 12 years of experience in news and media section.

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