The vice president of the Spanish Government and Minister of Ecological Transition, Teresa Ribera, ruled out this Tuesday a possible extension of the Iberian mechanism to limit the price of gas in electricity production, recalling that it has not been activated since February.
“The extension of the Iberian mechanism, which in principle ends on December 31, would require an approval procedure by the Directorate General for Competition of the European Commission, which has already made it clear that [essa eventual extensão] beyond December 31 of this year it was not possible,” said Teresa Ribera.
Representing the Spanish presidency of the EU Council, at a press conference in Brussels after a meeting of European Energy Ministers, the official noted that “prices have already stabilized well below” the ceiling set by this Iberian mechanism. .
This “explains to a large extent why, since February, this mechanism has not been activated,” said Teresa Ribera, the day the supervisory authorities approved an extension, until January 2025, of the European ceiling on the price of imported gas (180 euros per Megawatt-hour), which would expire in February, due to the risk of conflict in the Middle East.
Last April, the European Commission approved the extension, until the end of 2023, of the Iberian mechanism in force in Portugal and Spain to limit the price of gas in electricity production, but which already provides for a “soft and predictable” elimination.
What is at stake is the Iberian temporary mechanism applied since mid-2022 to set limits on the average price of gas in electricity production, which in the case of Portugal and Spain is around 60 euros per Megawatt-hour (MWh).
This instrument was requested from Brussels by Portugal and Spain due to the energy crisis accentuated by the war in Ukraine, which put even more pressure on the energy market of the Iberian Peninsula, with limited interconnection capacity with the rest of the EU.
Data from Brussels reveal that, between June and December 2022, the maximum limit was set at 40 euros per MWh, increasing to five euros per month after the first half of the year.
The Spanish and Portuguese authorities told the European Commission that the total net savings, taking into account adjustment costs, amounted to around five billion euros between June 2022 and January 2023 for all Spanish and Portuguese consumers.
From mid-2022, and initially planned until May 31, 2023, there is a temporary mechanism to limit the price of gas in electricity production in the Iberian Peninsula, budgeted at 8.4 billion euros, of which 2.1 billion refer to Portugal.
Under this measure, electricity producers receive a payment that acts as a direct subsidy to finance part of their fuel costs, and the payment is calculated daily based on the difference between the market price of natural gas and a ceiling of the gas price.
Source: TSF
