The Iberian mechanism that set a ceiling on the price of gas for the production of electricity reduced the so-called regulated electricity rate by an average of 24.6% in Spain, according to a study to which Lusa had access today.
The mechanism, agreed by Spain and Portugal with the European Union, “has achieved its main objective: the regulated tariff prices of PVPC [Preço Voluntário para o Pequeno Consumidor] they were, on average”, between June 15, when it began to be applied, and August 31, “24.6% below what they would have been without the measure”, reads the study by the Spanish business school ESADE, signed by four academics, Manuel Hidalgo-Pérez, Ramón Mateo Escobar, Natalia Collado Van-Baumberghen and Jorge Galindo.
The Spanish regulated tariff, or Voluntary Price for Small Consumers (PVPC), is indexed to the price of gas in the wholesale market, that is, the price that electricity companies pay when they buy gas to produce electricity.
With the Iberian mechanism, a maximum price was defined for the gas used in the production of electricity and the producing companies are compensated for the difference with respect to the real value in the market.
The compensation is shared by consumers who have a regulated rate, to whom new contracts are added, and consumers who have other rates and renew their contracts.
The ESADE Business School study sought to assess the effect of this mechanism on the bills of electricity consumers in Spain, using “advanced econometric techniques”, as the authors explain.
“The results of the estimation indicate, with a high level of confidence, that the average price of electricity for consumers in the regulated market”, which in Spain represents the majority of consumers (around 40% of the total) “would have been between 19% and 30% higher” if the mechanism did not exist, the study reads.
But in addition to the impact on the final price of electricity, the study evaluated the possible effect of the Iberian mechanism on gas consumption for electricity production and the possible “leakage” towards “outside its scope of application”, that is, greater energy exports to France, with the financing of the lower price than in other markets being supported by Iberian consumers, who are the ones who pay the compensation to the companies.
In this context, the study concludes that the implementation of the mechanism “may have generated less desired effects”, the first being “an increase in the use of combined cycle plants at the expense of less use of hydroelectric production”, which emit carbon dioxide (CO2) and cogeneration plants, which are more efficient.
However, the study is not conclusive about a direct and unique effect of the mechanism in increasing the use of gas to produce electricity, because the analysis coincided with a period of extreme drought that reduced hydroelectric generation capacity, which depends on of water accumulation. .in dams.
Even so, the researchers consider that the implementation of the Iberian mechanism, even without this extraordinary circumstance of drought, or others, can become an incentive to “burn gas” to the detriment of clean energy sources.
As for electricity exports to France, the study concludes that they increased due to “the lowest prices in the Iberian market” combined with unscheduled stops since April at French nuclear power plants and hydroelectric production “to a minimum” due to the drought.
The researchers also underline a “pronounced change in the behavior of French prices” since June 15, for which they say they do not rule out that due to the Iberian mechanism there has been “a strategic change in the production of the French electricity system” to take advantage of the new conditions of the Iberian market.
Electricity exports from Spain to France grew by 80% between June and July and, in August, increased by 34% compared to the previous month, according to the study, which highlights that “if this trend continues, at the end of the year, exports they will have doubled compared to 2021”.
The authors of the study conclude that “there is an insurmountable dilemma between trying to reduce the price of gas in the short term and maintaining the incentives for both gas savings and decarbonisation” and argue that “when the European political objective of energy independence prioritizes first about the second, it would be important to explain the cost that is assumed and for what purpose”.
“In other words, it seems arguable that without this damage to the incentive to reduce fossil fuel consumption, the impact on citizens of a freely escalating price would be excessive in socio-economic terms”, but “defending this position would be convenient to design credible commitments that they change today the emergency measures for more solid measures of transition and reduction of demand tomorrow”, defend the academics.
Source: TSF
