BarcelonaThe fear of Russia turning off the gas tap for good translates directly into the markets. For now, Moscow has announced the three-day closure of the Nord Stream gas pipeline, which is used to bring Russian gas to Germany, starting on the 31st. But markets are anticipating a very difficult situation, with electricity and gas prices at maximums in European markets. The price of electricity in the Spanish wholesale market will mark this Wednesday its highest since the gas cap came into force: 436.25 euros per megawatt hour (MWh). Without the cap it would be even higher and reach 500 euros per MWh.
The price of light in the wholesale market
Dates of 2022 in €/MWh
In fact, the so-called Iberian exception it makes it possible that, despite the price increase, electricity in Spain is cheaper than in most other large European markets. To get an idea, this Wednesday the price on the French wholesale market will be 645 euros, in Germany 624 euros and in Belgium 611 euros. In Great Britain, the wholesale price has set a price of 539 pounds (more than 640 euros), which has raised all the alarms.
The price of electricity and gas next winter will be triple that of last winter. In the United Kingdom, the regulated market sets a maximum energy expenditure for the households that are accommodated there. This peak happened last April from 1,277 to 1,971 pounds and is estimated to rise to 3,500 pounds in October. A “catastrophic winter”, the director of EDF Energy in the United Kingdom, Philippe Commaret, warned on Tuesday, who in an interview with the BBC warned that half of British households will face energy poverty this winter.
In France, the price of electricity has climbed to a maximum, despite the fact that Paris does not stop importing Spanish electricity, which is cheaper thanks to the Iberian exception. The omens for winter aren’t much better than in the UK. Less than a week ago, President Emmanuel Macron referred to the effort the French will have to make to pay for energy as “the price of freedom”.
In fact, the price escalation is very clear. To give you an idea, the price of MWh in Spain on the wholesale market has doubled in a week. From 217.39 euros on August 18, it has gone to 436.25 euros seven days later. Growth has also accelerated. On Monday of this same week, the price was 270.88 euros per MWh, on Tuesday it was almost 100 euros more expensive and this Wednesday it already exceeds 400 euros, prices that have not been seen since the first week of the month of March, shortly after the beginning of the war in Ukraine and when the gas ban had not yet come into force.
Gas is precisely the cause of this escalation in the price of electricity. European natural gas futures contracts, traded on the Dutch platform TTF, have reached a quote of up to 295 euros per megawatt hour (MWh) this Tuesday, which is their highest level since last March , when a historical record of €345/MWh was reached. Natural gas futures trading closed on Monday at €257/MWh. At the opening of this Tuesday, the price has already shot up to 270 euros, although in the first hours of quotation it has reached 295 euros. It has subsequently dropped to 275 towards the middle of the session.
The rise comes after Russian state gas company Gazprom said last week it would shut down the flow of gas through the Nord Stream 1 pipeline for three days at the end of August for maintenance work. Furthermore, the Russian gas cut comes against a backdrop of reduced supply, as Nord Stream 1 itself is operating at only 20% capacity, carrying 33 million cubic meters per day, instead of 167 million cubic meters it can transport at most. The rise in the price of gas, moreover, has a greater impact now on electricity generation – and therefore on the price of light – in Spain, because at the moment more gas is used in generation in combined cycles of gas due to several factors, such as drought and higher demand, among others. To give you an idea, in the first seven months of the year, the use of gas for electricity generation has doubled compared to the same period last year.
Pimec calls for contingency plans
Faced with this situation, the Catalan employer Pimec asked small and medium-sized Catalan companies on Tuesday to speed up their contingency plans to deal with an imminent rise in energy prices. The organization chaired by Antoni Cañete has predicted that the price of energy will continue to rise “given the lack of effectiveness of the measures to control the cost of energy and the threat of the imminent cut of gas supply from Russia to Germany”.
Pimec recommends that SMEs opt for photovoltaic self-consumption, insulation, heat pumps and replace old appliances, as well as take containment measures, lowering the degrees of air conditioning and closing doors and windows. In addition, the employer has demanded changes in the energy pricing system so that it is “fair” and can avoid “the closure of companies and the loss of jobs”, which is happening, in their opinion , for a maximum price to avoid “runaway prices”.
Iberdrola is asking its French customers to switch to the regulated market
The Spanish electricity company Iberdrola is asking its customers in France, when their contracts expire, to ask for the transition to the regulated market, because if they renew their contracts, they would be hit by a sharp price increase. The Spanish electricity company has addressed its French customers who have to renew their contracts in France, telling them that if it affects market prices they will pay double or triple the so-called regulated sales rate (TRV), the French equivalent of the regulated market. The TRV tariffs, which are basically offered by the public electricity company EDF, have limited the increase in prices to 4% this year. Paradoxically, the president of Iberdrola, Ignacio Sánchez Galán, called the Spanish customers of the regulated market “scumbags” – although he later corrected and apologized -.