The increase in electricity reduces the compensation for old renewables by more than 750 million

View of a biomass plant, in a file image.

The abrupt rise in the price of electricity leaves some effects beyond the obvious —and huge— damage to the pocket of consumers. The cost of old renewables, those that needed compensation to cover their high cost of investment and operation, will fall in 2023 by more than 756 million euros compared to 2022, according to the estimate published this Thursday by the Ministry for Ecological Transition. and the Demographic Challenge. It will be almost 5,139 million euros, compared to 5,895 million the previous year.

The decrease responds, to a large extent, to the higher remuneration that these plants receive from the market: as the price of electricity rises, their remuneration increases and the additional income they need to cover the gap between their costs (depreciation and operation) and what they receive when selling their energy to the pool —until the so-called reasonable profitability is reached— are lower. It also positively affects the temporary suspension of the tax on electricity production, which the Government will continue to not collect in 2023 and, therefore, all electricity generating plants —renewable or not— will not have to pay, reducing their operating costs.

By technology, the greatest reduction in absolute terms will occur in old-fashioned wind energy: it will go from adding a cost for the system of 583 million euros in 2022 to zero in 2023. The compensation for photovoltaics also falls, and a lot, and solar thermal, which, although it will cost 160 and 104 million less, respectively, will continue to be the most onerous for the system: 2,087 and 948 million in 2023, respectively. Biomass drops by 54 million; the combustion of waste, in 38; the hydroelectric, in 35; biogas, in 29; and the oceanothermic, in less than one.

“The retribution of certain technologies – such as wind, hydroelectric, biomass, biogas and waste – practically disappears,” says a spokesman for the ministry. The reason? “The estimate of future income is very high in 2023: 207 euros per megawatt hour (MWh), instead of 120 euros [que marcaban los derivados] of 2022”.

On the other hand, the remuneration of the cogeneration and slurry and olive oil sludge treatment plants increased by more than 95 and 88 million euros, respectively. Unlike the previous cases, the amortization of the investment is minimal (they are not very expensive plants) but they have a series of costs associated with their day-to-day operation. The largest of them, that of natural gas – the fuel used by most of them to start the process – has skyrocketed. The income from these facilities will exceed 500 euros per MWh next year, more than double the average for the wholesale market in the year that is about to end.

The fall in the total compensation for old renewables will not have a direct impact on consumers, but it will affect the treasury and the deficit in the electrical system. As it is financed from tolls, with part of the income from CO₂ auctions and with other taxes specifically created at the time to reduce this tariff deficit, under normal conditions it should lower household electricity bills.

“Since the tolls are subsidized by political decision, instead of being passed on to consumers in the form of lower bills, the drop in the cost of old renewables will translate into a lower system deficit and, therefore, a lower cost for the State, because it will have to compensate less”, explains Luis Atienza, former president of Red Eléctrica de España (REE) and one of the best connoisseurs of the Spanish energy network. “No one could have predicted that prices would reach current levels.”

Unlike the old renewables, the new ones no longer need any compensation to be profitable, largely due to the technological maturity achieved in recent years. “Now the one who benefits from the drop in the price of renewables is the consumer, largely thanks to the auction mechanism. That is why they are so important”, ditch Atienza.