The wind and the gas give a break to the homes that resist the PVPC (Voluntary Price for the Small Consumer). November has been the month with the lowest price of electricity since the start of the energy crisis, at the beginning of the summer of 2021. The average cost per kilowatt hour (KWh) in the regulated electricity market fell in the tenth month of the year to 0 .19 euros in the absence of the last day -this Wednesday’s-, its lowest level since May of last year. At that time, the energy crisis was no more than a distant rumor: the price of natural gas was just beginning to rise, and what was to come did not fit into practically any rational scheme.
The electricity bill for the average customer in the regulated market —with an annual consumption of 3,500 KWh and 4.4 KW of contracted power— will be around 70.5 euros in November, 17% less than the previous month and almost half than in March —the most expensive since there are records—, according to data from Francisco Valverde, specialist from the sector consultancy Menta Energía.
Renewables are not only a key factor for decarbonization: they are also the main element to lower the electricity bill. “If prices have fallen so much in November, it has been due to the wind that blew in the middle of the month, when, in addition, it coincided with the drop in gas prices,” explains Valverde.
The recent rains have also helped, relieving the drought in the swamps and allowing hydroelectric plants to approach, although still a long way away, their normal rate of activity and allowing a still slight decrease in electricity demand for part of Portugal.
“The factor that has yet to be normalized is France,” completes Rafael Salas, professor at the Department of Economic Analysis and Quantitative Economics at the Complutense University of Madrid (UCM), referring to the brutal technical paralysis to which his company is being subjected. once almighty nuclear park.
The recent landing of prices in the Spanish wholesale market —and, with it, that of the rates paid in the regulated market, to which four out of ten households are attached— has further widened the price difference with respect to the rest of the large European markets. “The current price gap is big, especially with France but also with the UK. Seeing what is happening abroad, we can find ourselves with a song in our teeth with the prices we are having now, which are half those of the rest of Europe”, adds Valverde. “The Iberian exception exists, and I’m not talking about the cap on gas.”
Despite this recent improvement, 2022 will most likely end as the most expensive year ever in the Spanish electricity market: according to Valverde data, the annual bill for the average consumer in the regulated market will amount to almost 1,260 euros this year, compared to the 936 of 2021 and the 775 of 2020, the exercise of the pandemic.
Key in lowering inflation
This gradual reduction in the price of electricity —although from maximums— is having a significant driving effect on inflation, which is beginning to show signs of easing after months wreaking havoc on families’ pockets. The data for November, published this Tuesday, is crystal clear: the general price index moderated to 6.8% year-on-year, five tenths less than in October, with energy as the main contributing factor. Electricity accounts for slightly more than 4% of the CPI, and diesel and gasoline contribute slightly more than 3% and 2.5%, respectively; up to almost 10% in total. In the absence of final disaggregated data, of these three energy products, electricity was the one that fell the most and, therefore, the one that contributed the most to putting downward pressure on the index.
“Electricity is the main factor in this decline in the CPI,” Salas notes by phone. “The determinant of the drop is energy, and within this group, electricity is both the element that drops the most and the one that weighs the most.” In November of last year, annual electricity inflation was almost 47%; this November it is -22%. A radical paradigm shift in just 12 months.
What happens in the near future —continues Salas— will depend, above all, on the paths followed by natural gas. “The key factor is how cold or not the winter is. Reserves, however, are much higher than expected at this time of the year and, even if they rise in the coming weeks and months, I think one can be reasonably optimistic: except for a Filomena on a European scale, very unlikely, the price spike that we saw in August is history,” he says. In the shortest term, he adds, “things would have to turn out very badly” so that energy inflation —and, with it, general inflation— does not continue heading downwards in December. “Last year was a very bad month, and it is with which the comparison is established,” he closes.
The average price for the month that is about to end would have been even lower had it not been for the slight change in trend in recent days, in which the weather has been less accompanying —somewhat colder, with the consequent increase in demand ; and, above all, much less wind—and in which prices have picked up again.
According to the futures market —always imperfect, but the only possible guide as to where the shots will go—, the bill of an average household in the regulated market will once again spike after three consecutive months of decline: just over 70 euros in November will be almost 87 in December, a level similar to that of October, always according to Valverde’s calculations.
No compensation for the throttle cap
The script twist of recent months not only affects the wholesale market, from which the Voluntary Price for Small Consumers (the PVPC, as the regulated market is also known) draws. The drop in gas and the good tone of wind power has also allowed a significant relaxation in the compensation paid by households for the Iberian exception, the so-called gas cap: after five and a half months of application, in November it was practically zero ( barely a penny per megawatt hour).
A drop that, like that of the regulated market, responds both to cheaper gas and to the growing fraction of demand that has been able to be covered with renewables. The great paradox is that, up to nine days in November, this adjustment was not only non-existent but also negative: far from being affected by the growth in French demand, as up to now, Spanish consumers even saw their bills reduced by the high volume of electricity exported to the neighboring country.
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