Spanish heatwave expected to push electricity costs to new record highs.
Over the past three days, Spain has experienced record highs in electricity prices. Now, as the country enters another summer heatwave, the cost is expected to continue to rise. On the positive side, Spain’s national weather agency Aemet says high temperatures will peak over the weekend, when the cost of electricity will be lower under the government’s new three-tier pricing system, introduced in early June to encourage greater electricity consumption and allow consumers to play an active role in the country’s decarbonisation efforts.
The average price of electricity on the wholesale market reached new record highs on Wednesday for the third consecutive day, with an average price of 113.99€ per megawatt-hour (MWh), surpassing Tuesday’s record of 111.8€. This new high also coincides with the start of the first major heat wave of the summer, which threatens almost all of Spain with temperatures that could exceed 40 degrees Celsius.
This time last year the average price was 39.3€, so the rise is 190%, i.e. the price this Wednesday almost tripled the price recorded exactly a year ago, according to OMIE data collected by Europa Press.
The Bank of Spain explains why the price of electricity is soaring after setting another record high.
The Bank of Spain has published a very appropriate report on the Spanish electricity market on Tuesday. In total, 70% between gas and CO2: The Bank of Spain estimates that around 70% of the sharp rise in wholesale electricity prices in the first half of the year is due to higher CO2 emission rights (which are becoming increasingly expensive in an EU attempt to reduce the use of fossil fuels) and the price of gas, which is used by combined cycle power plants.
The institution stresses that Gas generates 10% of the electricity consumed in Spain but raises the electricity bill by 50%. Spain traditionally produces less wind energy, and it is not a good time for other renewables either. This means that within the group of electricity generating sources, the so-called collector, those using gas, such as combined cycle power plants, are gaining ground. When these companies bid on the wholesale market, the numbers are necessarily high because world gas prices are rising. In fact, this year they have risen to €44 per megawatt from around €15.
But there is more. Because in order to generate electricity in combined cycle power plants, companies need to buy carbon dioxide (CO2) emission allowances. And the market price for these allowances has also risen from 30.9€ per tonne in December to almost 53€ in June. The result is that carbon dioxide has increased the wholesale price of electricity by 8.1€ per MWh, according to the Bank of Spain.
Picture of the day: electricity prices soar in Europe
Electricity prices are out of control across the European Union and have been rising for several years. Now that the debate on electricity costs and prices is in the spotlight, we look at the combination of events that have caused prices to soar. The first is the extreme temperatures that the whole of Europe is experiencing. On the other hand, energy demand has returned to pre-pandemic levels.
In addition, the prices of the most expensive types of electricity, gas and coal have been soaring for months because of the taxes that have to be paid for them, such as the carbon emission permits with which the EU is trying to reduce greenhouse gases. Renewable energies, which are much cheaper, are not yet able to ensure a constant supply of electricity.
Although the above does not help the cost for us all, it can offer some form of comfort that for now, everyone is experiencing much higher bills in comparison to this time last year and can expect to do so for a while longer.
Prices on an average year begin to fall once the peak of the summer has been reached. We can only wish for a quick arrival of cooler temperatures and be vigilant and economical in how we use our energy. Avoid using the power where possible during the peak rate hours and use as much over the weekend.
Join our list
Subscribe to get free, unbiased advice about saving money and living in Spain.