Government Wants To Link The Electricity Rate To The Price Of Renewables

The Government is preparing a battery of measures to intensify its fight against high energy prices. Teresa Ribera’s department continues to search for formulas to contain the impact of the increase in natural gas and CO2 prices on electricity bills for domestic consumers and industries.

To achieve this, the Ministry has initiated a round of contacts with the renewable energy associations (AEE, Appa, Anpier, Protermosolar and Unef) and the cogeneration associations (Cogen and Acogen).

In these meetings – which have been preceded by those held by large industrial consumers and electricity companies – the vice president conveyed to the participants her intention to seek formulas to link the prices of the regulated electricity tariff (PVPC) and those of the industrial ones to this regulated generation that receives the technical name of Recore.

According to sources consulted by this newspaper, the Ministry estimates that it will need in the order of 27 TWh to supply the PVPC and about 30 TWh for the industry and has to seek this liquidity in the generation to be able to achieve its objective of lowering the invoice of these consumers.

The idea is that both volumes of energy stop participating in the wholesale electricity market (Omie) and receive a price that the Government has baptized as ‘Recore Price’, which it estimates between 57 and 60 euros / MWh. However, the ministry cannot intervene in the level of these prices since European regulation and competition limit it.

The measure would be applied during the next year and would be limited until the end of the year, at which time it would return to the current system given the expected normalization of prices.

To achieve this objective, the ministry – unlike Royal Decree Law 17/2021 – has asked the associations to send them their proposals, as well as the problems they detect in them to be able to analyze in the coming weeks.

Ribera’s intention is to achieve a legal framework that is impregnable in the face of Europe (risk of State aid) but also to reduce the regulatory risk that investors perceive right now after the September shock plan, as warned by the agencies of credit rating or large investment funds with letters of protest against the measures to the European Commission.

The sector’s employers have asked that the PVPC rate be left only for vulnerable consumers
The Ministry of Ecological Transition launched the revision of the PVPC for public consultation on October 1 to try to reduce its link to wholesale market prices, a measure that would be embedded within this next package of measures and with the auction of primary energy that the electrics reject.

The electrical employers’ association has requested on numerous occasions that the PVPC be altered so that it is indexed to a longer-term basket of products so as not to transfer the volatility of the market to the vulnerable consumer. In fact, the employers of the sector have asked that this rate be left only for vulnerable consumers and the severely vulnerable and that the rest of consumers be taken to the free market, as provided for by European directives.

The PVPC has allowed during its years of existence that most of the exercises have had a more competitive price than that of the liberalized market to the point of sometimes generating losses to the regulated trading companies.

Renewable profitability
The ministry also has on the table a proposal to laminate the income from renewables and be able to use that money to face the rise in electricity.

Recore’s regulated generation has a guaranteed return on investment of 7.3% and right now these amounts are higher. The initiative on the table is to use this greater liquidity to alleviate the increase in prices in exchange for not cutting their income in the next review of the regulatory period.

Market regulation currently links the profitability of the facilities to income in the daily and intraday market, which in practice also means discouraging this type of technology from going to forward markets.

The Ministry, however, has wanted to make it clear to the sector that in no case the Recore technologies should fear a modification of the remuneration regime.

Ribera has to present, foreseeably before the end of the year, the conditions of the primary energy auction approved last September.

The Chairman of Iberdrola, Ignacio Galán, as well as the CEO of Endesa, José Bogas, have already questioned whether these auctions can be held because practically all of their energy already has signed contracts, mostly between the generators and marketers of the integrated groups.

The Royal Decree-Law that corrects the September shock plan means opening up the possibility of incurring a tariff deficit in the electricity sector. The 2,600 million that the Government was going to reduce to the electricity companies to face the elimination of the charges in the tariff can be reduced significantly and generate a hole in the accounts of the electricity system.

Energy agreement at the Hispano-Portuguese Summit
Spain and Portugal have analyzed the situation of high gas prices and the impact on consumers with a view to the implementation of the European Fit for 55% package to achieve the new objectives and the imminent celebration of COP26.

Electric mobility played a prominent role at the Summit and the establishment of support instruments to promote it, together with the development of the infrastructure for recharging electric vehicles and the entire industrial value chain.

Thus, a work platform has been agreed to develop an Iberian electric car cluster. It will have support instruments to promote integrated industrial projects, based on innovative products and services. Both countries will also cooperate in promoting the strengthening of an electric vehicle charging network and its interoperability, ensuring its deployment in road corridors on both sides of the border. In addition, an Iberian program for sustainable batteries will be created.

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