Victory for Spain in energy supply stand-off
Wholesale price of electricity due to fall, which will see bills reduced
A MARATHON meeting of EU heads of state in Brussels ended with Spain winning the day and gaining the right to establish an ‘Iberian exception’ in the European energy market.
This will mean that electricity prices in Spain will no longer be ‘distorted’ by the high price of gas.
Prime Minister Pedro Sánchez had gone to the summit last week with the objective of brokering a deal for Spain and Portugal.
Sr Sánchez argued that the Iberian Peninsula should not be penalised as the two countries only generate a very small percentage of their electricity from gas-powered systems.
According to public broadcaster RTVE, he walked out of the meeting for a short period when opposition to Spain’s plan from other countries appeared to be about to block the bid.
Afterwards a relieved PM told journalists that Spain had won an important concession that will allow the government to tackle the high electricity prices which are hitting businesses and threatening economic growth – and causing misery for households.
The 'Iberian exception'
Member States agreed that Spain and Portugal can deviate from the bloc’s rules on energy pricing due to the spike in costs caused by the Russian invasion of Ukraine.
European Commission chief Ursula von der Leyen admitted that the Iberian Peninsula
has a ‘very special situation’.
The energy mix in Spain and Portugal, she said, has ‘a high load of renewables’ but very few interconnections with other EU countries.
“Therefore, we agreed on a special treatment that is possible for the Iberian Peninsula so that the Iberian Peninsula can deal with this very specific situation they are in and manage the electricity prices in the way that we have been discussing,” she said.
The summit also produced accord on authorising Member States to band together on a voluntary basis to purchase gas in bulk.
“The root cause of high electricity prices is, in a big part, high and volatile gas prices,” Mrs Von der Leyen
said. “So we will join forces, pool our demand and use our collective bargaining power when purchasing gas. In addition, we must complete pipeline infrastructure and ramp up our storage.”
Proposal for Brussels
The Spanish government is now working on the proposal for the exceptional measures for the Iberian energy market, which are due to be sent to Brussels this week for approval.
According to state news agency EFE, this will see a maximum price set for gas which is used to produce electricity in Spain.
In order not to skew the European energy market, the ministry of the ecological transition is working on a system
which will see two prices used for electricity – one for the Iberian Peninsula market and the other for connections with France.
This is to prevent a ‘large demand’ from France for cheaper electricity from Spain.
At the time of going to press no maximum reference figure had been set for the price cap for the production of electricity via gas.
Minister for social affairs, Ione Belarra – from Podemos – said her party wanted a cap of €30 per MWh, which would see average monthly bills reduced to around €110.
However, national press sources suggested the figure could be €50 per MWh.
In addition, minister for the ecological transition, Teresa Ribera explained that the temporary solution to bring down prices would see the cheapest form of energy (usually renewables) used first at any given time in the national energy market – the remainder to make up the supply required by the national grid would then be filled by more expensive sources.
Sr Sánchez said he was convinced that the proposals would be approved in a very short time by the European Commission
“The following day they will be published in the official state bulletin (BOE) so it will have an immediate effect on electricity bills,” he said.
More measures
The government also announced targeted measures to bring down the price of electricity for vulnerable people.
An additional 600,000 households will be eligible for aid in Spain, taking the number to around two million.
Discounts via the electricity coupon (bono social eléctrico) will be upped from 25% to 60% for ‘vulnerable consumers’ – and reach 70% for the ‘very vulnerable’.
The government is also extending measures brought in last year to bring down electricity costs, which included reducing IVA (VAT) on bills from 21% to 10% and cutting the ‘special electricity tax’ from 5.11% to 0.5%.
These will now be in place until the end of June.
The government is also making it cheaper to create renewable energy by reducing taxes paid by the producers.