When the Russian invasion of Ukraine broke out in 2022, Spain was able to use a mechanism that allowed it to contain the price of electricity and lower a soaring electricity bills for consumers.
However, this time round in an arguably worse situation (the US/American War has closed the Strait of Hormuz and all First World countries, including the States, have nearly exhausted their strategic reserves) the European Commission is preventing the Spanish Government from doing the same:
Why? Because the EC considers that the conditions are not met and the Spanish Government will not be able to reactivate the Iberian Exception which was the case when the war in Ukraine broke out.
It was the main demand of the trade unions and also of the Spanish Vice PM, Yolanda Díaz: to recover this exceptional mechanism that allowed Spain and Portugal to limit the impact of the price of gas on the electricity market.
Even the CEOE (Spanish Confederation of Business Associations) does not look unfavourably upon the Iberian Exception but the Government told them that the European Commission “has no appetite”for it, which is a euphemistic way of saying that they are dead against it.
The fact is that back in 2022, it was not only a case of soaring prices but of Europe facing possible emergency rationing measures, which is not the present case… yet.
What happened in 2022 was that Brussels allowed Spain and Portugal to set a reference price for the gas used by power plants and then compensate the difference with respect to its real cost. The objective was to prevent the escalation of the fuel costs from ending up contaminating the overall price of electricity.
Although gas is once again straining the markets, it is nowhere near the extremes reached in 2022. The wholesale price in Spain stood this Friday at 79.56 euros per megawatt-hour, according to Mibgas, compared to the less than 30 euros with which the year had begun. This same week it reached 85.63 euros, which means practically tripling the price. However, four years ago this same index was 230 euros per MWh at the end of August.
The continent has diversified suppliers since 2022, greatly reducing its dependence on Russia, and faces this present crisis with a more prepared energy structure than at the beginning of the Ukraine war. These are precisely some of the arguments that Brussels wields to reject the introduction of the Spain’s exceptionality of back then.
The fact is that electricity in Spain continues to be cheaper than that of countries like Germany, which continues to feature among the most expensive markets in the Union for both households and businesses.
Despite the EC’s reasoning, the rising cost of fuels is causing unrest amongst farmers who depend on diesel with strikes being planned by agricultural trade unions (Asaja, COAG, and UPA), using tractors to block roads.
Lastly, although the EC has rejected Spain’s petition, it has authorised state aid of up to 70% of the increase registered in agricultural and fishing diesel; something that the Government is working on.
(News: Spain)
Keywords: The Iberian Exception Rejeted, Fuel Prices, Ukraine Invasion 2022, European Commission, Spanish Government
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