Tuesday, October 19

CEOE takes a profile in front of Ribera’s plan while the industry rejects the marginalist system of electricity prices

Industrial employers demand that the Government change or even “eliminate” the marginalist system for the formation of electricity prices and ask for more measures in the face of its spectacular escalation. Large industrial consumers believe that the shock plan approved by the Executive on Tuesday can mitigate somewhat the spectacular rise in energy prices, but they ask for more measures. Meanwhile, the CEOE does not have an official assessment of the Royal Decree-Law designed by the Ministry for the Ecological Transition, directed by Teresa Ribera.

CEOE recognizes that it does not have a position on that standard which, it recalls, has been approved in the fast-track and without going through any consultative body. The plan has put electricity companies, whose employer’s association, Aelec, is part of CEOE, on the warpath, and has caused sharp falls in the sector’s stock market. This has once again brought out the ghost of the closure of nuclear power plants that would further trigger the prices of the electricity wholesale market.

CEOE refers to the statements of its president, Antonio Garamendi, who on Thursday, asked about the effect of this escalation on SMEs and the self-employed, limited himself to appealing to legal certainty and reflecting on the configuration of the electricity mix. Spain has “renounced” nuclear in the long term and “we have wiped out” coal, said Garamendi, who chaired CEOE’s Energy committee and was a director of Red Eléctrica for 13 years (until 2012).

The head of an employer association integrated into the confederation points out that, in sensitive matters, “CEOE always has a problem in the face of the conflict of interest of the very different sensitivities that it harbors.” And the question of light is thorny like few others. The historic rise has meant that in August the CPI marked its maximum since 2012. The Bank of Spain believes that the rebound is “transitory” but does not rule out that if electricity continues to rise there will be “more lasting” price rises and second-hand effects return (transfer to all productive sectors). Inflation is one of the factors that explain the increase in the Minimum Interprofessional Salary (SMI) that the Government has forced against the CEOE criteria.

The emergency decree approved by the Government includes a “confiscatory” measure, according to the PP: temporarily withdraw (until the end of March, when gas is expected to be cheaper) 2,600 million euros from electricity companies to reduce the so-called system charges , the regulated part of the receipt set by the Government. The charges finance, among other items, the premiums for the oldest renewables and are applied inversely proportional to the contracted power.

For this reason, and according to a recent report by the Bank of Spain, before this escalation for 44% of companies with fewer than ten workers, spending on electricity accounted for more than 1.5% of their income, well above the rest of the Business. “The highest average prices are observed in the lowest consumption segments, generally corresponding to tariffs with lower tension levels, due to the design of the tariffs itself,” the agency explained.

Thus, the reduction in charges that Ecological Transition has forced will especially benefit small consumers and SMEs. But its effect will be “marginal” for the industry that consumes the most, warns the general director of the steel company Unesid, Andrés Barceló. Among the beneficiaries will be the self-employed, who generally have little contracted power. On Tuesday, before the measures were known, the president of ATA, Lorenzo Amor, assured that the Government’s plan would only lower electricity by 12%, compared to the average increase of 45% in the bill that he assured this group suffers. According to Ribera, the decrease that the decree will allow will be 22%. ATA assures that it maintains that forecast of 12%. Hospitality of Spain, also a member of CEOE, has not been able to analyze the text of the decree “in depth” and does not comment on the measures. And the Spanish Confederation of Commerce (CEC) has not responded to questions from this medium about its assessment of the decree.

For Barceló, from Unesid, one of the roots of the problem of rising energy prices is the current system for the formation of electricity prices, whereby the power plant that presents the last offer in the auction allows to match supply and demand every hour determines the price charged by the rest. A system that, according to Ribera, does not allow to change the EU and against which the head of Unesid has been crying out for a long time. “There are some people and companies that consider not only normal but very efficient, in terms of the national economy, that a price is perceived of up to eight times the cost of a product or service,” he ironized in a recent article.

Barceló points out that this system “is not valid” because when it was defined at the end of the last century, “it was made for a production mix that was not the current one.” “It will be necessary to modify it and much more when this problem occurs throughout Europe, although it is more pressing in Spain”, which should ask the EU “to address this because it is a general problem.” “This escalation could sink the European economy,” says Barceló, who charges against the current emissions trading system, which he believes “perverted.” “It is not a price signal” and it may “sink the economy.”

The Unesid official, who criticizes “fundamentalism” against nuclear power, suggests to the Government that, “for the sake of transparency”, it forces the market operator (OMIE) to “make public every day at what price it has offered each one of the technologies “. “We still get some surprise” and “some who are boasting in the media that they are the cheapest are making offers close to the cassation price,” he says.

The ASCER tile employer, integrated as Unesid in CEOE, also rejects the marginalist system. On Friday he charged in a statement against the “runaway increase in energy costs”, called the government’s measures a “patch” and called for measures. “The first” is “to eliminate the marginalist price system of the electricity pool by a weighted system. In this way, each energy would be accounted for according to its price and the amount of MW contributed to the pool. Thus, an expensive energy would not affect the price of the rest and there would be no windfall profits to withdraw “, alluding to the so-called profits fallen from the sky.

“They fall short”

Faced with the outright rejection of the electricity companies to the Government decree, industry employers integrated in CEOE recognize that it contains a measure that can alleviate somewhat the spectacular rise in energy prices. For the general director of the Association of Companies with Large Consumption of Energy (AEGE), Fernando Soto, “it does not solve” a “quite complex” situation derived from the spectacular escalation of natural gas. But energy auctions with inframarginal technology (hydroelectric and nuclear) to force part of their production to be transferred to large electricity companies can help “to have a visibility of electricity prices and not be subject to fluctuations.”

The first of them will be held before the end of the year with 15,830 GWh, 6.3% of the national demand for 2020. Soto, who hopes that electrointensives will be able to attend, recalls that this industry consumes about 30 TWh per year and trusts that the percentage that will be auctioned in the future is higher since those 16 TWh “fall short”. It is an “irrelevant” amount, criticizes Barceló, from Unesid, who predicts smacks among the recipients of these auctions: electrointensive and independent marketers, “which must amount to more than 50 TWh.”

The directors of AEGE and Unesid coincide in calling for “substantive” measures to lower the cost of energy and make it equal to France or Germany. “In April, we have gone from estimating a final price of 66 euros / MWh for the Spanish electrointensive industry to 102.5 euros / MWh last Monday, before the last record,” says the general director of AEGE, who compares that price with 43.8 euros from France and 69.1 from Germany.

The futures of the electricity wholesale market in Spain for 2022 stood at 101.25 euros / MWh on Friday and this year “it will close with an average price close to 100 euros,” estimates Soto, who calls for specific auctions between large industry and renewable promoters to sign long-term supply contracts (PPA) “at competitive prices” and exemptions of 80% of transport tolls, “as in France and Germany”. In Spain they would have an impact that amounts to about 150 million annually.

AEGE also claims more compensation for the industry for indirect CO2: 220 million for this year, compared to the 179 million that the Government has authorized. And by 2022, “at least 450-500 million”. Soto recalls that the Climate Change Law contemplates that up to 25% of the income collected by the State from the auctions of these rights be allocated to this, which this year have tripled due to the greater climate ambition of the EU.

For Confemetal, integrated in CEOE and which brings together 77 associations from the metal industry, commerce and services (metallurgical, capital goods or mechanical workshops), the decree is “a patch to resolve the situation in the very short term” and ” It improves the situation a little “in a” temporary “way, but it does not solve the” structural problem of the electrical system “. It refers to its latest newsletter, which includes an analysis of the price of electricity as a pillar of competitiveness that is prior to the publication of the decree.

In it, he points out that the rise in electricity “and its devastating effects on the economy of households and companies”, which “are already fed back and strengthened by the subsequent increases in inflation, has generated attention that should be taken advantage of for, in a once and for all, to respond to one of the biggest problems facing industrial competitiveness in Spain “.

It highlights that “in Spain we suffer high costs of the transmission and distribution networks, taxes and charges incorporated into the final electricity rates that have nothing to do with production costs and that respond to compensatory decisions of various political decisions”. Without citing nuclear power, he calls for a mix that does not dispense with “any mature, competitive and low-carbon energy technology.”