Tuesday. 29.11.2022
ENERGY CRISIS

Spain and Portugal want to cap the price of gas at 30 euros per MWh

Limiting the price of gas would have an immediate reducing effect on electricity prices, since both are linked in the European energy market
25/03/2022. Prime Minister Pedro Sanchez, offered a joint press conference with the Prime Minister of Portugal, Antonio Costa, at the end of the European Council. Photo: La Moncloa.
Spanish Prime Minister Pedro Sanchez (R) and his Portuguese counterpart Antonio Costa during a joint press conference at the end of the last European Council in Brussels. Photo: La Moncloa.

Spain and Portugal have already delivered to the European Union (EU) their proposal to cap the price of gas in the two countries.

Both governments are working to make effective the so-called 'Iberian exception' in energy matters that the European Commission allowed at the last European Council held in Brussels last week. Madrid and Lisbon are now proposing to set the maximum price of gas to be used to produce electricity in combined cycle power plants at 30 euros/MWh until the end of the year. Combined cycle power plants burn gas to produce electricity.

Limiting the price of gas would have an immediate reducing effect on electricity prices, since both are closely linked in the European energy market. In fact, decoupling them has been one of the main objectives of the Spanish coalition government in this energy crisis.

The Spanish Third Vice President and Minister of Ecological Transition, Teresa Ribera, confirmed that this limit of 30 euros per megawatt hour is the goal to be achieved. And she made it clear that this is a joint proposal from Madrid and Lisbon. Now, it must be approved by the European Commission, in accordance with what was agreed at the last European summit. This could still take three or four weeks, according to the Spanish government.

"We have proposed the cheapest price of gas at which we understand this adjustment should take place, 30 euros per MWh, but this is one of the technical elements of the proposal that we have to discuss with the European Commission," said Teresa Ribera.

An 'energy island'

The so-called 'Iberian exception' is justified by the very low energy interconnection of Spain and Portugal with the rest of Europe, below 3%. This practically turns both countries into an 'energy island' and makes it possible to set temporary price limits.

The proposal from the two Iberian nations, the details of which have been published by the Portuguese newspaper Publico, emphasizes that this price limiting mechanism would be in force until the end of the year.

The Spanish-Portuguese petition emphasizes that this is a temporary measure to respond to "exceptional circumstances that are causing serious economic difficulties."

Spain and Portugal want to cap the price of gas at 30 euros per MWh
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