The Government finalizes a Royal Decree-Law to approve the extension of the Iberian exception until December which, according to sector sources and confirmed by government sources, foresees approval by the Council of Ministers this Tuesday. The text includes a new reference price for the so-called gas cap starting in April, which will be more favorable for Spain and Portugal.
Brussels limits for now the Iberian gas price limit until December compared to Spain’s proposal for 2024
The details were closed this Monday afternoon in Brussels with the community authorities by the third vice president and minister for Ecological Transition, Teresa Ribera, according to these sources.
As conceived, the gas limit that came into force in June 2022 would have to be 60 euros per megawatt hour (MWh) from this month of April, since in January of this year it began to rise at a rate of 5 euros/MWh per month, from the 40 euros/MWh initially set for its first six months.
But, as stated in a draft Royal Decree-Law prepared by the Ministry of Ecological Transition and to which elDiario.es had access, “a linear path was agreed from €55/MWh in March to €65/MWh in December 2023, ending with the same natural gas price level that it would have reached in May if the extension of the Iberian mechanism had not been carried out”.
That is, the €65/MWh ceiling agreed by Spain and Portugal with the European Commission would not be reached next May, but in the last month of 2023.
The moderation of gas prices in recent weeks meant that this mechanism was not activated in the last month. But it must be remembered that the lower the gas limit, the greater the price differential that Spain will achieve compared to the EU in the event of further increases in the price of this raw material.
As indicated in the draft text to which this medium had access, “if the regulatory change approved by this royal decree-law is not verified, the reference price of natural gas for the month of April would be €60/MWh. However, with the proposed new regulation, this value will be situated at €56.1/MWh, according to the new linear trajectory agreed with the European Commission until December 2023”.
“For this reason, this legislative change should come into effect in early April, otherwise there will be a regulatory jump and an undesirable setback in the upward trajectory of the reference price of natural gas”.
“To comply with the Commission’s agreement and ensure that the reference price for natural gas of €56.1/MWh is applied throughout the month of April, it is necessary that said value be in force at the time of the daily market meeting of April 1st, that is, it must be applicable on March 31st, 2023, as otherwise the previous results could not be guaranteed”, continues the text.
The project trusts “the adoption of the decision to authorize the extension by the European Commission in the coming days”. The decree will be presented this Tuesday after the Council of Ministers by the first vice-president and Minister of Economic Affairs, Nadia Calviño, given that this Tuesday Ribera will have to be present at the Council of Ministers for Energy of the EU to be held in Brussels.
Thus, the draft decree establishes a progressive rise in the natural gas reference price, which would rise from 56.1 euros in April to a pace of around 1.1 euros per month (except in August, when it would increase by 1. 2 euros).
Thus, and according to that project, the gas ceiling would be 57.2 euros/MWh in May, so at the beginning of autumn, in October, it would be 62.8 euros/MWh, until it reached 65 euros in December.
Sector sources consider the lowering of this threshold a “great success” of the third vice-president and minister of Ecological Transition in the negotiations with Brussels. When announcing that he will ask for the extension of the supply limit, Ribera trusted that it would last until the end of 2024, one more year than what was finally proposed by Madrid and Lisbon.
That objective, for the time being, will have to wait, waiting for the reform of the electricity market that the 27 will now start to negotiate, after the diluted proposal from Brussels, and that Spain hopes to implement during the EU Presidency for the second half of this year. The text proposed by Brussels, as Ribera said on Monday, “does not contain many essential novelties to stimulate price controls, but it is a good basis to work on”.
The text to which this medium had access indicates that the Iberian solution “has effectively contributed to the moderation of inflation, avoiding increases in the price of electricity that would otherwise have occurred, and its consequent contagion effect on other consumer goods and services “, and estimates the savings obtained between the 15th of June and the 31st of January alone at 5,000 million euros” for all final consumers of electricity, benefiting both domestic consumers and SMEs and industrial consumers, and generating indirect positive effects on remaining long-term electricity markets which, as a whole, allow concluding the convenience and opportunity of its implementation”.
“Its effectiveness has been even more decisive in times of stress in the energy markets, in which the high prices of natural gas in all European hubs have dragged electricity prices to levels never seen before. For example, in August 2022 the average daily market price in Spain stood at €154.89/MWh”, which even added to the cost of compensation for gas power plants “represented a reduction of more than 18%” compared to what would have resulted without the Iberian mechanism. “In that month, prices on the wholesale electricity markets in France, Germany and Italy stood at €492.49/MWh, €465.58/MWh and €564.14/MWh, respectively”, recalls the text.