Iberian exemption by EU
The European Commission gave its approval on Tuesday for an Iberian exception allowing Spain and Portugal to decouple the price of gas from that of electricity for the next 12 months and introduce an energy price cap.
The political agreement enables the creation of a temporary mechanism that will cap the price of gas to an average of €50 per megawatt-hour which should result in electricity bills being halved for about 40% of Spanish and Portuguese consumers with regulated rates.
Spain’s Ministry for Ecological Transition and the Demographic Challenge responded that “all consumers will benefit from this agreement” and that “the Commission has committed to working actively to increase the interconnection of the Iberian Peninsula with the rest of Europe.”
The Spanish and Portuguese governments — both led by Socialist prime ministers — had been calling on Brussels since last summer to implement measures to reduce electricity prices which have skyrocketed as a result of increased demand for natural gas, supply chain issues and geopolitical tensions including the war in Ukraine.
EU member states trade electricity on a wholesale market based on a system of marginal pricing which in practice means that everybody gets the same price for the electricity they are producing regardless of how that electricity is produced — renewables are produced at near-zero cost. The price is then set by the most expensive way of producing electricity.
Thanks to PeterA for the link.
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