Electricity price reduction Spain


Pablo Valverde | 16 may 2022 | Fiscal, legal


The reduction in the price of electricity in the wholesale market affects both the industry and families. On May 14, the Royal Decree-law was published, establishing a temporary adjustment mechanism for production costs to reduce the price of electricity in the wholesale market.
After what was experienced in the energy sector , with prices at historical highs, whose origin began in mid-2021. All this, as a consequence of a strong imbalance between supply and demand, the accumulation of the pandemic and the political conflicts between Russia and Ukraine.
A file movement by the government was expected. Although, it will enter into force once the European Commission formally authorizes it.

Reduction of the price of electricity in the wholesale market

The rule places the rise in the price of electricity as a consequence of the above, and also, of the contagion of the price of gas to the wholesale electricity sector.
The adjustment mechanisms established by the royal decree will have a duration of 12 months. And the objectives are to limit: the price of gas and lower the price of electricity in the Iberian Peninsula .
These adjustment mechanisms will be applied to the costs incurred by the facilities
What are the facilities?
  • a) Electrical energy production facilities corresponding to natural gas combined cycle plants.
  • b) Production facilities corresponding to conventional generation technologies that use coal as fuel.
  • c) Electricity production facilities belonging to group a.1 of article 2 of Royal Decree 413/2014, of June 6 , those included in the first transitory provision of the same that would have been covered. By the second transitory provision of the Royal Decree 661/2007, of May 25. As well as, the cogeneration facilities that use natural gas as primary energy and that are covered by the general modality of remuneration regime, in the terms provided in article 4.º-B of Decree-Law no.o 23/2010, of March 25
However, be careful! It will only be applicable to these facilities only on that energy negotiated in units of energy sale offer before the market operator. And not in bilateral contracts with physical delivery in said facilities.

Calculation of the electricity price reduction Spain

The mechanism to limit the price is a mathematical formula aimed at limiting the price of gas consumed by thermal power plants. The Royal Decree-Law establishes a gas reference price of €40/MWh for six months. Which increases by €5/MWh per month thereafter. Thus, a return to “normality” in the fixing of prices is sought gradually.
The consequences of the reform is that the price of electricity will depend on two factors: the price of Iberian gas and the price of CO2.
In short, with these measures, we hope that the industry and households that have the regulated rate will benefit.
Pablo Valverde

CMO & Co-founder en Crowmie

CMO & Co-Founder of Crowmie, the investment platform for tokenized Renewable Energy projects. A tool for any person, company or entity to participate in the Energy Transition and invest for the climate. Social Networks are my second great passion. Being able to talk, share and transmit in a close way is something very powerful, so you can always find me on Instagram, TikTok or twitter with my community. Born entrepreneur, creative and curious.

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