The Government will link by decree the electricity tariff to the cost of renewables

The Ministry of Ecological Transition met yesterday with the renewable energy associations (AEE, Appa, Unef, Anpier and Protermosolar) and the cogeneration associations (Acogen and Cogen) to inform them that next Tuesday a new Royal decree will be approved by the Council of Ministers -Law that will link the energy of the PVPC tariff and that consumed by the industry to the cost of renewables, the so-called Recore.

The meeting, held yesterday morning, was attended by both the Vice President, Teresa Ribera, as well as the Secretary of State for Energy, Sara Aagsen, and the General Director of Energy, Manuel García Hernández. All of them urged the renewable energy associations to send their comments during this week to file the details that were pending or the specific cases before their next approval.

The associations already held a meeting last Friday, as announced the Economist, to analyze their proposals, but it was not possible to consolidate a common position before the Executive due to the doubts that it generated in some a possible loss of profit for the plants.

The vice president has conveyed to the sector that the new measure will entail elementary modifications of an exceptional nature that will be in force during 2022 but, at the same time, stressed that it is not a change of model but rather an exceptional measure that takes advantage of the increase in the liquidity of these technologies to face an exceptional price situation.

Ribera indicated to the organizations that the measure already has the approval of the President of the Government, Pedro Sánchez, to be able to implement it and guarantee that the commitment to achieve an energy price similar to that of 2018 is fulfilled.

The Government’s intention is that the approximately 90 TWh produced within the so-called Recore will be destined to cover the regulated tariff on a mandatory basis and the industry contracts. These Recore technologies receive a remuneration that can be between 6,500 and 7,000 million euros.

The ministry estimates that it will need in the order of 27 TWh to supply the PVPC and about 30 TWh for the industry and it has to seek this liquidity in generation in order to achieve its objective of lowering the bill for these consumers.

The idea is that both volumes of energy stop participating in the wholesale electricity market (Omie) and receive a price that the Government has baptized as Recore Price that estimates between 57 and 60 euros / MWh, which in practice represents a an improvement over the previous forecasts for these technologies, which were around 50-52 euros / MWh.

To get the approval of the electricity companies, the National Securities Market Commission has played a key role

The Executive also considers that this new Royal Decree-Law is adequate to European regulations by assuming a system similar to that applied by Portugal.

The option – in which the Government has been working for several months – will mean maintaining the legal guarantees that renewables have as well as their reasonable profitability conditions, an extreme on which the Executive has insisted, by using the extraordinary income to be able to offer competitive prices .

The vice president also aspires to present the measure with the associations to stage the agreement with the parties.

To get the approval of the electricity companies, the National Securities Market Commission has played a key role. The supervisory body issued a circular to unify the criteria for evaluating the benefits of renewables. This measure facilitates the approval of the proposal that the Government has put on the table, since it prevents this additional liquidity from being recorded in the accounts.

The Recore plants will no longer have the obligation to participate in the wholesale electricity market and would allow the energy generated to be sold at a price of between 57 and 60 euros estimated by the Government.

Ecological Transition would force as of 2023 to carry out the auction of primary energy that the electricity companies now see unfeasible. The price corresponding to this auction will represent 10% of the future PVPC -the regulated rate- together with other references that are currently being analyzed after the public consultation launched to the sector this past October and that would already come into effect from 2023 .

The industry, in check

The measure comes at a time when the average price of the October daily market was 200.06 euros / MWh, 446.8% higher than in 2020. This price was 43.3% higher than that of Germany and 15.9% higher than that of France. Compared to September 2021, the average price for October was 28.1% higher.

Considering the evolution of the daily market in 2021 and the future price quotes until the end of the year, according to Aege data, the estimated average price of the Spanish electricity market is 103.73 euros / MWh, a price 204.1% higher than 2020, and 16.7% more expensive than the German market and 3.3% more expensive than the French market.

The price of the future for 2022 in the Spanish market as of October 31 was 112 euros / MWh, 11.1% cheaper than a month ago, and 2.3% higher than the price of the German market. In the first ten months of 2021, the prices of Germany and France have been lower than the Spanish. In addition, for the electrointensive industry, considering the measures approved in its Statute, a price is estimated at the end of the year in Spain of 111.38 euros / MWh, more than double the French price, which is 47.74 euros / MWh , and more than 32 euros / MWh than the German.