Wednesday, November 30

The electricity bill will double in 2022 to € 218 / MWh on average

The respite that the drop in the price of electricity has given in the last four days will not last. The price in the wholesale market stood at 96.08 euros per megawatt hour (MWh), which represents a decrease of 49 percent compared to Sunday, December 26.

So far this month, the cost of electricity has marked an average of 251.58 euros / MWh. Thus, if maintained, December will close with a price close to 110 euros / MWh, more than triple that of last year.

Miguel Momobela, an analyst at XTB, attributes this decline to “price movements in the Christmas period, which tend to register falls in line with the decrease in consumption by companies and households.”

Electricity bill more than double

Despite this truce, the futures market indicates that the rise in electricity prices for next year will not ease, it is more anticipated that it will double in the next 12 months.

The Iberian market operator Omip foresees that by 2022 the price can skyrocket to 218 euros / MWh, which will double the average price set so far this year, 107 euros.

The operator predicts that in January 2022 the average price of the Spanish wholesale market will be 327 euros. While the average between January and March will reach 307 euros.

“If the volatility of electricity is not controlled in some way, the price increases in search of previous highs continue to be contemplated”

Miguel Momobela, XTB analyst

The cost will not drop below 180 euros / MWh in the coming quarters, according to Omip data. He estimates that this decrease could occur in March 2023, when a fall could be registered to 70 euros.

For his part, Momobela considers that “if volatility is not controlled in some way, price increases in search of previous highs are still being contemplated.”

Despite the escalating cost of electricity in Spain, this is lower than that experienced in other EU countries such as France or Germany.

Momobela attributes this difference to the fact that the starting price per MWh in both countries is higher.

“In France, the estimated average for the next trading day is set at 161.08 euros and in Germany, at 148.83 euros. In general, in several European countries the price levels have been higher and it is expected that they will continue to be so in 2022 ”.

Reasons for the climb

The vertical rise in the price of electricity has been driven by the increase in the price of natural gas, which with the arrival of winter and the decrease in reserves in some European countries will continue to rise, experts predict.

To this must be added the existing political tensions between Russia and Ukraine, regarding which political analysts do not expect an early solution.

Cushion the climb

To alleviate the impact of the rising cost of electricity, the Government approved last week to extend the tax reduction on taxes levied on electricity bills, such as VAT, electricity tax and electricity generation tax, during the first quarter of 2022.

The prices registered in the wholesale market have a direct impact on the regulated tariff or PVPC, to which almost 11 million consumers in Spain are welcomed, and serves as a reference for the other 17 million who contract their supply in the free market.

So far in 2021, the average price of electricity in the wholesale market has reached 113 euros per megawatt hour, 97.34 percent more than the average price of 2018, which with 57.29 euros / MWh was the year with the highest price after 2008.