Almost three years after the first curves in the energy markets – which would end up leading, through the Russian invasion of Ukraine, to the largest sectoral crisis in Europe – the Spanish electricity system registers the seven cheapest days in its history. The wholesale price of electricity will close the week at 4.53 euros per megawatt hour (MWh), the lowest figure since records began. Gone are the 4.66 euros of the second one from April 2013 – which was the cheapest of the entire historical series until now – and also the 6.72 of the last one from March of that same year, which was behind.
The reasons that explain this great drop in prices are, above all, two. The first and most structural, which was already coming weeks ago, is the collapse in the price of natural gas and carbon dioxide emission rights (COâ‚‚), which puts downward pressure on the entire market. in the hours in which that fossil fuel sets the price of electricity. The second, temporary but particularly important in this weekly streak, has to do with weather maps: the strong gusts of wind have activated wind energy like never before; the sun has maintained a good photovoltaic tone in many daytime sections; and the recent rains in the most important basins have allowed the hydroelectric plants to operate significantly above the average of recent times, in which the drought had taken its toll. The correlation is clear: the more renewables in the system, the lower the price of electricity.
This Sunday, the wholesale price of electricity will be zero euros for most of the day: between one in the morning and six in the afternoon, according to figures from the Iberian Energy Market Operator (OMIE). These will be hours in which the sum of renewable and nuclear generation – which is slowing down its production due to the boost from wind and photovoltaics – will far exceed demand. And in which the interconnections with France, Portugal, Morocco and Andorra will be in an unequivocal export sense. A very similar pattern to practically every day this week.
Households in the PVPC, great beneficiaries
Not all consumers are immediately benefiting from this unprecedented price reduction. Those who have been seeing their bills substantially reduced for days are the slightly more than eight million households and SMEs covered by the regulated market or PVPC, whose price largely depends on the wholesale price. In your case, the cut is immediate. For the rest, those who opt for the free market – mostly with fixed rates – the respite will only come when it is their turn to renew or when they decide to switch to the regulated one.
The recent fall in the price of electricity has, in fact, exceeded the forecasts of the Government, which in its decree of anti-crisis measures conditioned the reduction of VAT on electricity on the wholesale market price remaining above 45 euros per MWh. In February it already closed below that level, and both March, April and May point in the same direction, according to the futures markets. A powerful disinflationary factor, which has already been felt in the February data, which also allows a respite in public accounts.
The general feeling in the sector, almost 11 years after the last record of low prices, is that it will be much shorter until a new one is broken. That impression is supported by the data: while electricity demand is practically stuck at the same levels as a decade ago, renewables, by far the cheapest sources of generation, have grown – €”and they continue to grow–exponentially. Especially photovoltaic solar, which plummets prices in the central sections of the day.
Even if it is overcome, which will be overcome, a streak of prices as low as those of this week is not sustainable in the long term. First, for a meteorological issue: the cocktail of wind, water and sun that has occurred in recent days has been extraordinary. Second, because all the models point to increasing demand in the near future, as the electric car and aerothermal energy make their way into homes and the industry converts consumption that today is fossil to electric. And third, and no less important, because practically no generation plant – neither current nor future – is profitable at these prices.
February was already the cheapest month since there are records for those who opt for the PVPC, where the electricity margins are set in advance and the price of electricity varies hour after hour and day after day . In the second month of the year, the fair 40 euros per MWh in the Spanish wholesale market represented a drop of almost 70% compared to a year before and 33% and 29%, respectively, compared to Germany and France, the two largest consumption centers of the Old Continent.
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