Wholesale electricity price to skyrocket to €360.02/MWh on Wednesday
PVPC regulated market rates will be more expensive than ever before
The wholesale price of electricity continues on the upward trend that began this summer and has seen over 20 record highs since then.
On Wednesday, electricity in the PVPC regulated market will average at €360.02/MWh.
According to OMIE, the Iberian Peninsula's electricity market operator, it will be most expensive, €380/MWh, from 6 pm to 8 pm, and cheapest, €331.30/MWh, from 11 pm to midnight.
These prices affect the 10 million households with contracts in the regulated electricity market known as the PVPC. People whose contracts are in the so-called free market, an estimated 17 million households, pay a fixed amount every month regardless of daily wholesale price fluctuations. In order to obtain Spain's 'bono social' electricity bill vouchers, however, people must have PVPC contracts.
Reasons for soaring costs
Low natural gas reserves, which have been attributed to geopolitical unrest between the EU and Russia, and are needed to power combined-cycle plants, as well as an overreliance on more polluting electricity sources incurring hefty CO2 emissions rights — only 19.8% of Catalonia's electricity came from renewables in 2020 — are largely behind this increased market volatility.
There has also been a marked increase in demand in 2021 compared to 2020 when Covid-19 forced most activity to a halt during the strict lockdown months and wholesale prices dropped.
While costs have risen across Europe, Spain is one of the most-affected countries as around 40% of the population has PVPC contracts.
Mitigating measures
From June 1, there are three PVPC electricity rates that vary according to when power is consumed:
The highest rate is Monday to Friday from 10 am to 2 pm, and from 6 pm to 10 pm.
The middle rate is Monday to Friday from 8 am to 10 am, from 2 pm to 6 pm, and from 10 pm to midnight.
The cheapest rate is throughout the day on Saturday, Sunday, and bank holidays, and up until 8 am Monday to Friday.
On Wednesday, the Spanish government announced the extension of measures to tackle electricity price increases until the end of March 2022. In late June, Madrid lowered the VAT for electricity from 21% to 10%, while earlier in September, the Spanish government lowered the special tax on electricity from 5.1% to 0.5% and suspended the 7% tax on electricity production.
Filling the Sink podcast
Cristina Tomàs White and Guifré Jordan join Lorcan Doherty to discuss the causes and the consequences of the energy crisis affecting Europe.
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