Spain and Portugal will be able to cap price of gas

The mechanism consists in paying for gas firms the difference between the cost of the gas on the market and the ceiling fixed for the energy mix.


After pleading, for almost nine months, with Brussels so that the price of the gas is capped on the Iberian Peninsula in the energy mix and is used to fix the price of all the electricity produced, the ‘Spain celebrates his victory. Following the preliminary agreement given Monday May 9 by the European Commission, in a letter of conformity, Madrid summoned an extraordinary council of ministers, Friday, May 13, in order to approve the complex legal mechanism that will allow it to limit to 50 euros on average for twelve months the price of the kilowatt/hour (kWh). Portugal had to do the same in stride.

The two countries are pleased to have obtained from Brussels the recognition of an “Iberian exception”, on the grounds that its interconnections with the rest of Europe, via France, – 2.8 % of its energy capacity -, are very far from the 10 % planned for 2020 and the 15 % recommended by Brussels for 2030, and that the weight of renewable energies is particularly notable.

“energy island”

At the end of April, the Spanish and Portuguese governments had already congratulated themselves on the agreement in principle given by the competition commissioner, Margrethe Vestager. “The European Commission recognized the exceptionality defended by the president of the Spanish government, Pedro Sanchez, and the Portuguese Prime Minister, Antonio Costa,” said Spanish Ecological Transition, Teresa Ribera, believing that the peninsula Iberian is “almost an energy island, which does not benefit from the internal electricity market due to its low level of interconnections”.

It only remained to fix a convincing mechanism, which does not suppose a help covered with the State. This will consist in compensating for gas companies, paying them the difference between the cost of gas on the market and the ceiling fixed for the energy mix. An amount that will be assumed both by the other electricity companies, which have obtained unexpected profits in recent months thanks to the record price of gas, and by consumers, who, despite their use, could see their invoices drop nearly 30 % according to the estimates of the Spanish Minister.

“We are going to socialize costs and profits, and withdraw unexpected system gains, to assume the cost of the mechanism and the reduction in market price,” detailed the Portuguese Minister of the Environment, Duarte Cordeiro, Wednesday April 11, recalling that producers of hydraulic electricity “sell at a value much higher than production costs, because they sell at the price set by gas”. He recognized that “the effect in Spain will be more important” than in Portugal.

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/Media reports.