Except for an unexpected turn in the last week of 2022, the darkest year for electricity consumers since there are records, the market will draw the curtain with a much less bitter ending. The price of electricity in Spain will fall this Thursday to 52.51 euros per megawatt hour (MWh), its lowest level since May 2021, even before the energy crisis began to show its claws.
The reason for this decrease must be found in the recent return of the rain —which has brought hydroelectric plants out of the slack of recent times— and of the wind —which will boost wind generation. Both technologies will add more than six out of every ten megawatts generated and will substantially reduce the burning of natural gas, by far the most expensive source for generating electricity.
The drop this Thursday will be especially pronounced at dawn, when consumption drops and wind generation soars: between midnight and four in the morning, prices will slightly exceed 30 euros per MWh. Also between noon and lunchtime, when they will be around 40, according to data from the Iberian Electricity Market Operator (OMIE).
However, only slightly less than four out of ten customers will benefit from this reduction in the wholesale market, those with a regulated rate, also known as PVPC. For this group of customers, also the one hardest hit by the brutal increase in prices in the last year and a half, the incentive to switch the oven on for Christmas Eve dinner forward to tomorrow is particularly clear.
The mixed electricity on the day of the Christmas Lottery will be a good anticipation of what the matrix will be like in the near future, when the massive deployment of energies will confine gas to a very discreet background. This Thursday, green sources will jointly contribute almost 70% of electricity generation; a figure that rises to almost 90% if nuclear is added, also free of emissions. Wind power alone will account for 38%; hydroelectric, 26%. The strength of both will make combined cycles —the gas plants, which push prices up almost every day— virtually irrelevant. They will contribute less than 1%, compared to 15% a week ago.
“The drop in prices responds, above all, to the increased wind energy production, which will skyrocket this Thursday,” sums up Juan Antonio Martínez, an analyst with the ASE group, one of the largest energy aggregators in Spain. “If we add to that the increase in flowing hydroelectric [la no regulable, que opera en función del agua que se desembalsa de manera constante] and that the nuclear power plants are working at full load, we have the complete picture”. The reserves of the reservoirs for hydroelectric use have risen by almost seven points in the last week. “And the price of gas is also falling, so the little expensive that comes in, comes in a little less expensive,” completes Francisco Valverde, from Menta Energía.
Given that the seven atomic reactors are not scheduled to stop until almost spring, adds Martínez, “it would be logical to think that, until then, on days when the wind blows we will have a brake on electricity prices.” A compelling reason to think that inflation —in whose calculation both electricity and fuel have a significant weight— has already begun to draw a clearly downward trajectory.
Lower demand and greater gap compared to the rest of Europe
That, on the supply side. Regarding demand, there are also reasons that explain the gradual drop in prices, far from the more than 300 euros per MWh set by the Spanish wholesale market at this point in 2021. In November, electricity consumption in Spain fell by 9% year-on-year in gross terms, and so far in December it has accumulated a decrease of more than 7%, according to data from Red Eléctrica de España (REE). “That is also helping to lower the price at auctions”, points out Martínez.
The difference in prices between the Iberian electricity market and the rest of the continent, a constant in recent times, will be especially evident this Thursday. Everything, despite the general drop in prices throughout Europe, once the cold wave was over. Compared to just over 50 euros per MWh in Spain, at the gates of Christmas, Italy is around 240. And France and Germany, 200 euros per MWh.
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