Neither free electricity nor charging for putting on the washing machine, the keys to the negative pool prices that worry Ribera: "There is a head and a tail"

Paula María Madrid

Madrid

Updated Monday, April 1, 2024-17:46

The price of electricity has gone into a tailspin in Spain. The fall has not occurred from one day to the next, but it was this Monday when the forecasts of the Iberian Energy Market Operator (OMIE) placed Spain

for the first time at negative levels

of the wholesale or

pool

market . This phenomenon, which had already occurred in the adjustment market (intraday) and in other European countries, consolidates a trend that has had the sector on alert for months. Abnormally low prices are increasingly being recorded, around zero, in longer stretches of the day.

The average daily market price was 20.3 euros per megawatt hour (€/MWh) in March, almost 50% lower than that of February and 77% lower than the average recorded in March 2023. The curve has decreased throughout Europe once the lack of control of the electricity crisis has been overcome. Spain and Portugal show a downward trend. The

pool

average in our country is about

69% lower than that of Germany and 62% lower than that of France

. Portugal, closely aligned with the home market, however, has not yet entered negative territory.

The situation has unleashed all kinds of rumors, from the fact that citizens are going to be paid for consuming electricity to the fact that the drop has been caused by the Iberian exception, a measure that died on December 31, 2023 and that had not been applied for a year. The Spanish

pool

paradox is more complex and will not wreak havoc immediately. Of course, its long-term effects give investors and authorities reasons to be on guard because, as the Minister for the Ecological Transition,

Teresa Ribera,

explained this afternoon : "It is good for the consumer, but it has a face and a cross".

What caused the fall?

The OMIE forecast indicated prices of

-€0.01/MWh

between 2:00 p.m. and 5:00 p.m. this Monday. This is an almost symbolic decrease compared to the values ​​close to zero that have been reached in recent months, especially at specific times during daylight hours, when all the photovoltaic offers come in. To this basic situation we must add the effect of storm Nelson, whose heavy rains and gusts of wind have triggered the production of hydraulic and nuclear power, two of the cheapest technologies on the market. This, added to the fact that today is a holiday in many Autonomous Communities, which translates into less electricity demand, has constituted an ideal breeding ground for this price collapse.

No free electricity or charge to turn on the washing machine

Daily market prices should not be confused with what the consumer ultimately pays. The first is only

a component of the final bill

, to which other regulated costs must be added such as charges, tolls or taxes themselves (the VAT on electricity returned last month to 21% compared to the 10% at which the Government temporarily lowered it due to the electricity crisis).

Although striking, hours at negative prices are a drop in the ocean. The -0.01 euros per megawatt have occurred in three of the 24 hours of a Monday, whose maximum price will be

21.43 euros/MWh and whose final average price will be 1.8 euros/MWh

. It is only the first day of the month, so the impact on the monthly bill will be almost imperceptible, especially considering that according to the evolution of the daily market in 2024 and the future price quotes until the end of the year, the The estimated average price of the Spanish electricity market is

€55/MWh

, 37% lower than in 2023, according to the latest barometer from the Association of Large Energy Consumption Companies (AEGE).

Will there be a difference between the free market and the PVPC?

For those who are in the free market, that is, who have agreed on a fixed rate with their marketer, the collapse of the

pool

will not impact their bill at all. For those who are covered by the regulated rate or Voluntary Price for Small Consumers (PVPC), the effect will be practically nil.

In January, the new method of calculating the PVPC

came into force

, a reform promoted by the Ministry for the Ecological Transition to reduce the volatility that had citizens in the regulated market in suspense. Paradoxically, this reform, which reduced the weight of the daily price in the final calculation of the bill, now implies that these negative prices have even less impact on the consumer's pocket than they would have had with the previous model, although, in any case, the effect would have been very limited.

Are companies selling at a loss?

No. The truth is that negative prices in the

pool

indicate that there are producers paying to generate energy, but this does not imply that they are selling it at a loss. Different experts consulted by this newspaper agree on the diagnosis. The producers that are offering their energy at negative prices are, for the most part, photovoltaic plants that still enjoy the primacy regime, that is, they receive regulated remuneration for what they produce. As this remuneration weights the volume of electricity sold and not the price, it is worthwhile for the solar plants covered by this regime, the so-called Recore, to offer at prices below zero in the current conditions of renewable oversupply, in order to enter the market before other competitors who cannot lower their prices so much and then collect the premium.

The electric... Does it always win?

As the large electricity companies recalled when the Government tried to intervene in their prices during the harshest moments of the energy crisis, around 80% of the energy generated by the sector's giants is already sold in advance at fixed prices. These forward agreements or PPAs are a shield for these companies, but there are caveats. Some of the PPAs include clauses that allow the client to break the agreement and buy electricity on the market when the pool registers negative values, according to industry sources.

This collapse of the wholesale market, if repeated over time, could end up impacting the business of large and small electricity companies in the medium and long term, since it is an anomalous scenario that generates a lot of uncertainty for both the seller and the seller. as in the buyer. "If now the PPAs are being signed in the area of ​​40 euros/MWh, when it comes to renegotiating these contracts, it will be very difficult for a large industrial company to justify to its investors the renewal of a PPA at those prices when the market is marking negative values ​​or close to zero at many hours of the day," explains a source. In short, the price curve could end up hindering forward contracting.

Does it also happen in Europe?

The sources consulted assure that electricity episodes at negative prices have already occurred in other European countries, such as Germany or Holland. This phenomenon of prices tending towards zero due to a massive entry of renewables draws what is known among technicians as the duck curve and bending it is a key battle to ensure the profitability of renewable investments.