• Mon. Dec 6th, 2021

The Proposals Of The Chamber To Stop The Rise In Light

ByRoger Fisher

Oct 21, 2021

The Barcelona Chamber of Commerce considers that the current crisis derived from the uncontrolled rise in electricity pricesIt must be solved by redesigning the price formation system, reducing access barriers to long-term contracts, selective fiscal measures, and transforming fixed invoice charges into variables.

The institution has spent a few weeks preparing a report to provide effective proposals for a situation that is putting both individuals and companies on the ropes and warns that “there is a risk that the high prices of electricity in the wholesale market will still become more expensive more in the short term, a fact that with the current price formation model would translate into a sharp increase in the bill for consumers “.

For the Chamber, it is necessary “measures that solve the root of the problem and not only serve to contain the current short-term price escalation.” On October 7, the price of electricity exceeded the barrier of 300 euros per megawatt hour between 8:00 p.m. and 9:00 p.m. The weekly average reached 288 euros.

The causes are mainly temporary, as a consequence of the rise in the international price of gas, added to other more structural causes such as the increase in CO2 emission rights or the policies of the European Union with stricter environmental objectives.

The proposals
The Chamber advocates redesigning the price formation system of the regulated electricity market in order to reduce the high short-term transmission of wholesale prices to consumers and companies. “This will make it possible to reduce episodes of high volatility and reduce the uncertainty of economic agents,” say experts from the Chamber.

It would also be convenient, according to this institution, to reduce the barriers to access contracts with a medium and long-term price horizon by small consumers and companies with a high volume of demand. Fiscal measures should be the third leg of the changes, with the aim of mitigating the impact of sudden increases in the price of electricity. “Given the current context of strong increase in public debt,

Major impact in Spain
The main idea of ​​these proposals is that although the increase in electricity prices in the wholesale markets has been homogeneous in Europe, the impact on consumers and companies is being higher in Spain. This is explained by a greater transmission of wholesale prices to retailers by the current price formation model in the regulated market, as well as a high proportion of users in this market segment.

According to the National Commission of Markets and Competition, of the 26.8 million domestic consumers, 40% (10.7 million) are covered by the regulated market. The Chamber recognizes that some of the measures recently approved by the Government, such as the temporary reduction of VAT and the special tax on electricity,

One of the problems highlighted by the Chamber’s report is that suffered by small and medium-sized companies “which are limited when it comes to formalizing contracts with medium and long-term marketers.”

The causes
The closure of the Maghreb gas pipeline, which connects Algeria with the Iberian Peninsula through Morocco, could lead to a reduction in supply, according to the Chamber. On September 30, the Minister of Foreign Affairs, José Manuel Albares, announced that Algeria (a country that provides more than 40% of the natural gas consumed in the State) would guarantee its exports to Spain.

However, the Chamber considers it “difficult” that a sufficient volume of gas can be ensured if only the other pipeline connection between Algeria and the Peninsula is used (the Medgaz gas pipeline, with a lower capacity than the Maghreb), complemented by transport by boat.

Another factor that influences the energy shortage is that in the coming weeks refueling stops are scheduled to three nuclear reactors (Ascó I, Almaraz and Cofrentes), which, if the calendars are maintained, will coincide in November (each stop lasts approximately one month).

Taking into account that the three reactors together provide almost 45% of the installed nuclear power in the State as a whole, “it is very likely that the electricity production with combined cycle plants will increase during this period. Consequently, the consumption of gas could skyrocket and, therefore, aggravate the rise in electricity prices, “concludes the Chamber.

The arrival of winter in northern Europe can aggravate the situation. Taking into account that the three reactors together provide almost 45% of the installed nuclear power in the State as a whole, “it is very likely that the electricity production with combined cycle plants will increase during this period.

Consequently, the consumption of gas could skyrocket and, therefore, aggravate the rise in electricity prices, “concludes the Chamber. The arrival of winter in northern Europe can aggravate the situation.

Taking into account that the three reactors together provide almost 45% of the installed nuclear power in the State as a whole, “it is very likely that the electricity production with combined cycle plants will increase during this period. Consequently, the consumption of gas could skyrocket and, therefore, aggravate the rise in electricity prices, “concludes the Chamber. The arrival of winter in northern Europe can aggravate the situation.

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