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Experts say high electricity prices will last 'until end of year'

New all-time high of €106.57 per MW/h in Spain

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22 July 2021 01:04 PM

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ACN|Barcelona

The price of electricity in Spain hit a new all-time high on Wednesday, at €106.57 per MW/h – surpassing the January 2012 record of €103.76.

This was the day's average price, but the most expensive hour was €110.64 per MW/h from 8 to 9 pm.

On Thursday, the cost of electricity decreased slightly but was still at prices well above average: €101.57.

Yet, experts who spoke to the Catalan News Agency (ACN) said that this is not a one-off situation, calling on users to "get used to it."

"We have to get used to seeing these prices until the end of the year," said Marc Bonet, who is in charge of business development at Barcelona Energia.

Temperatures, level and costs of gas among reasons for high cost

The current spike in temperatures, limited use of renewables, increase in the toll for polluting energy sources and the low level of gas reserves in Europe are some of the reasons for which prices are rising.

The fact that combined cycle power plants and ones that consume coal are covering the heightened demand is also to blame for pricier bills.

"Regardless of what kind of energy you consume, even if it is green, the energy price is that resulting from the pool," said Jorge Andrey, a lawyer who specializes in the energy sector, referring to the mixing of all kinds of energies sources that are then sold to households at the same price.

The price of gas, which faces an additional fee for the right to emit CO2, is sometimes to blame for the cost of electricity, he added.

Market unsteadiness is also another reason why some believe prices will continue to soar.

"We are experiencing unsteadiness because we are in the permanent process of increasing raw materials that are used to generate electricity. As long as oscillations are upwards, we will have a more expensive price for power," said Ana Garcia, the Catalan economists association's committee for economy and sustainability president.

Bonet said that the Spanish government does not have the tools to prevent spikes in the short term, and also stated that prices are expected to be around €90 per MW/h until the end of the year.

Another expert, David Villar, who works at the Catalan institute for energy (ICAEN), said that the current spike is not a result of exceptional situations such as storm Filomena earlier this year. He believes that prices will remain at levels far above €50 per MW/h, which is the average reference price.

Prices are set daily in an auction where producers sell their energy in Spain – and the operator OMIE, taking into account the supply and the estimated demand, sets the prices for the following day, setting a single cost regardless of the kind of energy consumers will use.

Lower VAT on electricity not enough

The Spanish government decided to lower the VAT on electricity from 21% to 10% after the end of the year in order to lower costs.

Yet, experts said that this effect will "wane" due to the increase in the price of gas and in the right to emit CO2.

Saving money

Experts advise users to consume energy when it is cheaper.

The highest rate applies Monday to Friday from 10 am to 2 pm and from 6 pm to 10 pm.

The medium rate applies Monday to Friday from 8 am to 10 am, from 2 pm to 6 pm, and from 10pm to midnight.

The cheapest rate applies throughout the day on Saturday, Sunday, and bank holidays, as well as until 8 am Monday to Friday.

Self-supply is another way to save money – Barcelona Energia installs solar panels to help households make the decision to switch to this energy source. 

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  • Endesa's Mata electrical substation in Barcelona's Poble-sec neighborhood (by Aina Martí)

  • Endesa's Mata electrical substation in Barcelona's Poble-sec neighborhood (by Aina Martí)

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