Hydroelectric energy has marked the price of electricity in the wholesale electricity market in most of the hours of August, the most expensive month in the history of the so-called pool, with eight historical records (the last, this Tuesday) that will translate into the most expensive electricity bill yet.
Water at the price of gas: the hydroelectric plant sets electricity prices for 75% of the most expensive hours of the year
The rally is already impacting inflation, which has shot up to its highest level in almost a decade, with the consequent deterioration in the purchasing power of companies and families in full recovery, and forecasts suggest that the bill for a domestic user under the voluntary price to small consumers (PVPC) point to a 25% increase compared to 2020, although this year the receipt was the lowest in recent years because the pool price (now through the roof) sank due to the pandemic.
The third vice president and minister for the Ecological Transition, Teresa Ribera, announced this Monday, in her expected appearance in Congress to explain the rise in electricity, that the Government is preparing a legal reform to strengthen control over the emptying of reservoirs that ” it can obviously have an impact on the price of electricity. ”
After the social alarm generated by this succession of records and the images of practically empty swamps in a matter of weeks, the reform would start from article 55 of the Water Law, which regulates the powers of the Cuenca agencies and, where appropriate, they it allows “to condition or limit the use of the public hydraulic domain to guarantee its rational exploitation”.
It would be carried out regardless of the results provided by the information files that the Ministry has opened to Iberdrola and Naturgy for the emptying of reservoirs in the Duero, Miño-Sil and Tagus basins.
The objective, explained Ribera, is to order the use of dammed water “not only as a resource of economic content that can be turbined, but as a first-rate environmental resource and with a first-rate social impact.”
“It happens from time to time that there is a decrease in the volume impounded. What had never happened is that it was in such a short time, with such intensity and so close to or below the level,” lamented the minister.
It should be remembered that, recently, an electricity company, Naturgy, has raised several claims of patrimonial responsibility to claim a millionaire compensation for the fixation of ecological flows in its dams in Galicia.
“It is not reasonable”
In his appearance, Ribera protested against the “scandalous reduction” of the volumes of water in some reservoirs during this summer and stated that “it is not reasonable” that this source, which uses a public good, has “set the price of 65% of the hours in June, 64% in July and 59% in August ”, when“ obviously it does not internalize neither the cost of fossil fuel nor the cost of CO2 ”.
But that’s how the electricity market is designed. The pool, which is governed by a marginalist model as established by the EU, is breaking records because the price of natural gas and CO2 emission rights is skyrocketing. Hydroelectric plants, which have very low variable costs, are taking advantage of this situation to present even higher offers than those of combined cycle plants (which burn natural gas), thus setting the price charged by all generation technologies.
This record Tuesday, Ribera recalled, the hydroelectric plant will be the one that sets the price by presenting the most expensive offer “in 17 hours of 24 hours a day,” taking advantage of the high prices of natural gas.
It is no exception. A recent analysis by elDiario.es showed that the hydroelectric plant had set the pool price in 75 of the 100 most expensive hours this year with record prices. In mid-August, the so-called pool began a streak of five consecutive daily records in the heat of the heat wave and the water came to set the price in 22 of the 24 hours a day. Since then, combined cycles have had a greater weight in pricing. But water has remained the great dominator.
Ribera, who assured that he is going to “fight” in Europe in the face of this escalation, indicated that it is “very probable” that what the companies have done with the reservoirs is legal, but he reproached the electricity companies for “not at all” showing “social empathy”, a value that, he said, is also “listed on the stock market.” In early August, after the extension of the so-called social shield to avoid supply cuts to vulnerable customers, Ribera warned companies that “this is not the time to maximize profits.”
The third vice president, who in her appearance on Monday supported the creation of a parliamentary commission to analyze the causes of this escalation of the receipt, made it clear that she is not willing to take on the measures proposed last week by Podemos to set by decree maximum prices for hydroelectric or a fixed price for nuclear, because they would be contrary to European regulations.
The Government, he said, “is never going to promote the adoption of measures that we know are directly contrary to community law” because “there is nothing more harmful to citizens” and that “ends up becoming a loss of confidence for the country” and it translates into “sanctions plus interest”, “sometimes at the community level, or as has happened recently with the hydraulic canon, with sentences that force us to return 1,400 million to the hydroelectric plants.”
In clear allusion to the proposals of United We Can, Ribera cited “some basic elements of the community framework that we must not forget”: the “express prohibition” of “establishing regulated wholesale prices” for “more than 25 years” and the “prohibition of to establish maximum or minimum prices “, as well as to” discriminate technologies in the wholesale market “, something that is the” quintessence “of European energy policy.
Regarding the fixed price for the nuclear plant that Podemos has asked for, this idea “may be conceptually attractive.” But “it does not fit” in the European framework, and “it is not comparable to the French case”, where nuclear power is a monopoly in the hands of the state-owned EDF, while in Spain it is an oligopoly of five companies.
In addition, there would be a high risk of “litigation” with the companies because the electricity companies propose a fixed price of 65 euros, while Podemos has proposed a “fork” in which the minimum price that the reactors would charge is, he said, 18 euros. . “I tell them the same thing I said to Mr. Galán,” referring to the president of Iberdrola.
The vice president offered little news about her recent proposal (raised years ago by United We Can) that a public company manage expired hydroelectric concessions. He did indicate that “the participation of local actors can be considered”, “centralized management through a public company” or “mixed solutions”.
And he made it clear that this generator would have to abide by market rules, as does Enel (owner of Endesa), which has wholesale prices even higher than those of Spain, although the transalpine country lacks nuclear energy, while in Spain it is it is still the first source of generation with 20% of the total.
In the absence of new draft measures, Ribera confirmed in his appearance that the suspension of the tax on generators will be maintained until the end of the year and indicated that he is studying formulas for the semi-regulated rate of the voluntary price to small consumers (PVPC), which it is directly indexed to the so-called electricity pool, it ceases to have that direct reference to the wholesale market, as Endesa and Iberdrola recently proposed.
In the Government they are “sensitive to a demand raised by consumer associations” to “regulate that PVPC rate again, reducing their dependence on a volatile market such as the wholesale market” and linking it to “a basket of more stable indicators” that allow prices “less volatile” than now, although at the cost of a higher risk premium for the consumer.
For this reason, “we must be cautious about which indicators it indexes and when it occurs”.
The PVPC dates from March 2014 and was implemented by the Ministry of Industry that was then directed by José Manuel Soria, with a PP Government, which today cries out against this system. After canceling the previous procedure, a quarterly auction known as Cesur in which electricity companies, financial entities, brokers and traders participated. These auctions yielded a significant extra cost for the consumer that amounted to around 2,000 million in the period between 2008 and 2013.
While waiting for the proposed solution to reform the semi-regulated tariff (which despite these fluctuations is cheaper than the offers on the free market), Ribera’s big bet is the two “structural” measures that he has proposed to lower the invoice in the In recent months through two separate bills: the fund to remove the cost of the oldest renewables from the receipt and the cut to hydraulic and nuclear due to the increase in cost of CO2.