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Spanish Electricity Market Needs Adjustments To Reduce Households Cost

The sharp rise in the price of electricity in the wholesale market registered these days has put the question of possible reforms in the sector at the center of the public debate. The renewed attention of politicians to variations in the price of essential goods and services is positive. Less so is the simplistic and flavored approach of partisan use that is sometimes made of the matter.

The current rise in price has several factors. On the one hand, the exceptional increase in demand linked to low temperatures. On the other hand, in terms of supply, the absence of generation from cheaper energy sources, renewable ones such as wind or sun. When these sources are not used, gas is burned, in combined cycle plants, or ultimately coal.

The price of gas has risen significantly these days, largely due to lower supply stemming from Algeria’s supply problems, but also due to increased demand around the world. Finally, the payments to be made by electricity companies for CO2 emissions have also been high.

There do not appear to be any anomalies in this. Above all, the conjunctural rise is not the biggest problem or the best prism to tackle the issue;

Electricity is a basic service. It is part of any consumption pattern and essential cost structure of any company. The variations in its price have a greater impact on families with low incomes and small and medium-sized companies. A comparative look offers interesting clues.

Spain, according to Eurostat data, was the fifth country in the EU with the highest price of electricity for households in the first half of 2020. It is, on the other hand, below the European average in the price for other users.

The segment that has a lot to do with the bad price data for homes is the tax part, with Spain being the third country in the EU with the highest burden. It is this underlying reality that attention should be focused on. It makes no sense to accuse the governments of the day – as it happens now and the other way around in the past – of market fluctuations. Structural solutions must be found.

The Government claims that in recent years the cost has dropped by 40%. But this does not prevent the bad place of Spain in the European comparison. It is therefore necessary to continue improving. In that sense, it does not seem an effective solution to bet on a public actor in the sector, as proposed by the minority partner of the Government, United We Can.

It is true that other European countries have them; but it is not obvious that this in itself lowers costs. Other routes seem more reasonable. On the one hand, review the tax segment that weighs on the invoice.

On the other hand, the Government’s plan to create a National Fund for the Sustainability of the Electric System has interesting features, which aims to distribute the weight of support for renewables throughout the energy market and not only in the electricity bill.

Regulatory aspects can be considered, drawing inspiration from other European models, and competition must be watched, for example between traders in the open market segment. It is a very important debate for the country. It must be faced, keeping the advance of green energies as a pole star, and if possible without partisanship of little distance.

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