Spain ends week with the cheapest electricity in its history | Economy

Almost three years after the first curveballs in energy markets that eventually led to the Russian invasion of Ukraine due to the biggest industrial crisis in European history, these are the seven cheapest days in the history of the Spanish electricity system. The wholesale electricity price will end the week at €4.53 per megawatt-hour (MWh), the lowest since records began. The 4.66 euros of the second one from April 2013 – which until now was the cheapest of the entire historical series – disappeared, as well as the 6.72 euros of the last one from February of the same year, which was behind …

Almost three years after the first curveballs in energy markets that eventually led to the Russian invasion of Ukraine due to the biggest industrial crisis in European history, these are the seven cheapest days in the history of the Spanish electricity system. The wholesale electricity price will end the week at €4.53 per megawatt-hour (MWh), the lowest since records began. The 4.66 euros of the second one from April 2013, which was so far the cheapest of the entire historical series, disappeared, as well as the 6.72 euros of the last one from February of the same year, which lagged behind.

There are primarily two reasons for such a significant drop in prices. The first and most structural, which has been going on for several weeks, is the collapse in natural gas prices and carbon dioxide (CO₂) rights, which is putting downward pressure on the entire market during the hours when these fossil fuels are taking their toll. electricity price. The second, temporary but especially important in this weekly strip, has to do with the weather maps: strong gusts have activated wind energy like never before; the sun maintains good photovoltaic tone in many daytime areas; and recent rains in the most important basins for hydropower have allowed hydropower plants to operate well above recent average levels as drought has taken its toll.

Households in PMCs are big beneficiaries

Not all consumers are immediately benefiting from these unprecedented price cuts. Those whose bills have dropped significantly within a few days are just over eight million households and small and medium-sized businesses covered by the regulated market, or PVPC, whose price largely depends on the wholesaler. In your case, the reduction occurs immediately. Otherwise, those who choose the free market – mostly fixed rates – will only get a break when it’s their turn to renew or when they decide to go regulated.

The recent fall in electricity prices has actually exceeded the forecasts of the government, which, in its decree on anti-crisis measures, stipulated a reduction in VAT on electricity while maintaining prices on the wholesale market above 45 euros per MWh. It already closed below that level in February, and March, April and May are all pointing in the same direction, according to futures markets. The strong disinflationary factor, which was already felt in the February data, also allows for respite in government reports.

The general feeling in the sector, almost 11 years since the last low price record, will be much lower until a new one is broken. This impression is supported by the data: although electricity demand has remained virtually the same as it was a decade ago, renewables, by far the cheapest sources of generation, have grown—and continue to grow—exponentially. Especially solar photovoltaics, whose prices plummet in the middle of the day.

Even if this is overcome, and it will be, a period of prices as low as this week will not be sustainable in the long term. First, regarding the meteorological issue: the mixture of wind, water and sun that has occurred in recent days has been unusual. Secondly, because all models point to increased demand in the near future as electric vehicles and aerothermal energy enter homes and industry switches to consuming electricity, which today is fossil fuels. And thirdly, and no less important, because practically no generating station – neither current nor future – is profitable at such prices.

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