The first unfavourable electrical energy costs open a brand new period within the Spanish electrical energy market | Economy | EUROtoday

Get real time updates directly on you device, subscribe now.

Open gates in the Belesar reservoir (Lugo), where the homonymous hydroelectric plant is located.
Open gates within the Belesar reservoir (Lugo), the place the homonymous hydroelectric plant is positioned.EFE/eliseo trigo (EFE)

The worth of oil crossed an unimaginable line within the early phases of confinement. It was April 2020 and, with half the world locked in his home, he was falling into unfavourable territory for the primary time in historical past. Contrary to all financial logic, as an alternative of getting paid, the oil corporations needed to pay to place the oil they produced in the marketplace. The virus had fully demagnetized the value compass, crossing a barrier that nobody might ever foresee.

Almost 4 years later and now virus-free, that misguided worth compass has simply been transferred to the Spanish electrical energy market. Early this Monday afternoon, giant electrical energy mills paid to inject their manufacturing into the grid, an unprecedented reality in these latitudes – though not in northern Europe, with Germany, the Netherlands and Scandinavia main the best way – and which represents the opening of a brand new chapter within the already lengthy historical past of the good Iberian bazaar of sunshine.

This obvious contradiction is, for now, lower than in different giant European markets. Both when it comes to time – it solely occurred between two and 5 within the afternoon on an Easter Monday – and when it comes to costs – it was barely a euro cent, a ridiculous quantity. But it reveals one thing a lot greater, a real structural change within the underlying dynamics of the market, with ultra-low costs and cannibalization between renewable applied sciences as new predominant notes. “It's a paradigm shift,” says Christina Rentell, senior analyst on the sector consultancy Aurora Energy Research. “This year and next we will continue to see very low prices and, most likely, more negative values.” In the medium time period, nevertheless, this pattern will decelerate: “There will be more batteries and, above all, demand will grow,” she predicts.

“It is an anecdote, but historical nonetheless,” says Natalia Fabra, professor of Economics on the Carlos III University of Madrid and one in every of Spain's main specialists within the subject of vitality economics. “It does say, however, two important things: that there is a lack of storage and that there is a lack of demand.” In March, inside electrical energy consumption was 7% decrease than in the identical month of 2019, simply earlier than the pandemic and the vitality disaster, in response to the most recent figures from Red Eléctrica de España (REE).

Water makes the distinction

Faced with the wind and, above all, the solar—together with the brutal touchdown within the worth of pure fuel, the 2 structural components behind the flip of the tables within the Spanish electrical energy market because the heights of the vitality disaster—, this time it has been the water that has damaged all of the schemes. The rainfall introduced by Storm Nelson, the very best in a very long time, has not solely boosted the reserves within the much-needed Spanish swamps: it has additionally elevated the contribution of hydraulics to the manufacturing matrix and compelled the house owners of the facility vegetation to promote at costs properly under what they want.

“This episode of negative prices has a lot to do with water: there is a lot of it and it is very cheap. It is the great differential fact,” highlights Francisco Valverde, unbiased analyst of the electrical energy sector. “The northwest is on the verge of collapse, with very full reservoirs in which the confederations are forcing discharging for safety reasons,” he explains, “and when the electricity companies have to release no matter what, they can no longer play with the price and that sinks prices. When you need to drain, you can spend days draining.” Something that leads you to suppose that unfavourable values ​​may be repeated within the very brief time period, however that then it will likely be “a long time” till they reappear within the wholesale market.

Opportunity price

Until this Easter Monday, a vacation in a number of autonomous areas – which reduces demand – Spain was an exception to a common dynamic in the remainder of Europe: when the wind blows robust, wind energy sinks the costs of the whole system and causes, In many instances, unfavourable draft values ​​throughout giant stretches of the day. This occurs for 2 causes, as Pedro Linares, from ICAI, summarizes: as a result of the outdated, premium renewables favor to pay to inject their electrical energy reasonably than having to surrender a subsidy that forces them to supply whatever the market, or as a result of the nuclear vegetation or some mixed cycles (fuel), favor to pay a small quantity reasonably than having to cease and begin once more, a really onerous operation. It is the so-called alternative price, one of the necessary ideas in economics.

“Paying to produce makes sense, above all, when the negative prices are very small and for a short period of time,” says the professor on the Universidad Pontificia Comillas, who foresees “many thousands of hours at zero price, and some of them directly “negative” if the inexperienced vitality aims included within the PNIEC, the Government's vitality roadmap, are met.

Ribera: “We have to find a balance”

“It is paradoxical how quickly events occur,” mirrored this Monday the third vice chairman and minister for the Ecological Transition, Teresa Ribera, minutes earlier than the value of electrical energy entered unfavourable territory for the primary time within the historical past of the Spanish electrical energy market. . “It is a good situation for consumers, but it also raises another question: we need very important and sustained investments over time… And, obviously, if zero prices are reproduced too often, they disrupt investors' plans. You have to find a balance point,” she defined.

Beyond the precise drop to unfavourable territory, what occurred this Monday is a transparent indicator of a a lot longer-term phenomenon, through which demolition costs impose their legislation in increasingly more hours of the day—photo voltaic hours, particularly. , but in addition very windy early mornings—and through which the remuneration of renewable builders is more and more in query.

“The question is when these prices are going to start to stop investment plans: it is a physical law,” concludes Fabra, who requires “urgent measures” to keep away from it and advocates a complete rethinking of marginalism, the system by which expertise The most costly—or least low cost—is the one which units the ultimate market worth in every time slot. “It is not suitable for anyone: it was not suitable two years ago, with the high prices of the energy crisis, and it is not suitable now with zero or directly negative prices.”

Follow all the data Economy y Business in Facebook y Xor in our e-newsletter semanal

The Five Day agenda

The most necessary financial quotes of the day, with the keys and context to grasp their scope.


Subscribe to proceed studying

Read with out limits