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    The use of gas to generate electricity soars in the middle of the heat wave and dilutes the effect of the 'Iberian exception'.


    June 16, 2022 - CE Noticias Financieras

     

      More air conditioning, less wind, more natural gas consumption. The heat wave that is ravaging Spain this week, and that will take a few more days to subside, has triggered the consumption of electricity while depressing the generation of wind and photovoltaic power (even under a sun of justice, from 25 degrees, the performance of the panels falls). The result of this cocktail has been a sharp increase in the burning of gas and coal for electricity generation: this Thursday, combined cycle power plants will cover more than 46% of national consumption.

      The almost 400 gigawatt hours (GWh) that the gas-fired power plants will contribute will exceed the maximum daily consumption in 14 years, according to data from the Ministry for Ecological Transition and the Demographic Challenge. The database of the gas system manager, Enagás, slightly lowers that record: in that period there have been, according to its figures, at least four days of greater use of gas to generate electricity. Adding coal, by far the most polluting source and one of the most expensive, fossil fuels clearly exceed 50% of the total electricity generated.

      The comparison with what happened just a week ago is eloquent. Last Thursday, according to data from the Iberian Energy Market Operator (OMIE), only 22% of electricity came from combined cycle plants, less than half of what it is now. Then, temperatures were still at acceptable levels - and, therefore, air conditioning, one of the great vectors of consumption, was less necessary -, the wind generated more than twice as much and solar contributed 30% more than this Thursday. "We are facing exceptional conditions: with the heat wave, demand is soaring and the slack in the Spanish system is the combined cycles. Most of the wind power is out due to lack of wind, and photovoltaic is falling a lot due to the heat and the haze," says Pedro Linares, a professor at the University of Comillas, by telephone.

      This greater need for gas and coal comes at a particularly negative time: with the newly released cap, which promises a substantial reduction in electricity prices but so far yields very discrete results, the compensation required for thermal power plants soars and the mechanism loses effectiveness. "The cost of the adjustment to gas plants, whose amount varies depending on the volume of gas needed by the system and its price (the more it is needed and the more expensive it is, the higher the compensation), is passed on to households and businesses," argue from the ministry headed by Teresa Ribera, who ask for time to evaluate the effectiveness of the measure. Contrary to what might be thought, the more gas there is in the mix, the less effective the cap is.

      The CNMC's magnifying glass

      The combination of greater use of gas for electricity generation and higher prices for this fuel in the Spanish and European markets - where it is at almost three-month highs, following the cut applied by Russia to its sales to the EU and the limitation of US exports due to problems at a key liquefaction plant in Texas - has triggered compensation for power plants. Yesterday's 59 euros per megawatt hour (MWh), which in itself was well above the Government's initial estimate, has become 88. However, the Executive argues that - even adding the compensation - the cap is being effective: without it, they say, electricity would have shot up this Thursday to 275 euros per megawatt hour, 16 more.

      For now, the heat wave seems reason enough for this stretch in gas consumption. However, to avoid potential malpractices, such as an unusual increase in the burning of this fuel or coal (both receive compensation) to the detriment of cheaper and cleaner technologies to bypass the system devised by the Spanish and Portuguese Executives, the National Commission for Markets and Competition (CNMC) will have the magnifying glass on the electricity market.

      "We maintain our supervisory tasks in the area of wholesale market price formation. And we will verify that, effectively, the demand exempted in the contribution to defray the adjustment corresponds to long-term contracts defined in the rule," explain sources of the regulator. "As always, we maintain our sanctioning powers in the event of anomalies or anti-competitive behavior," they add.

      Electricity companies: "It is temporary".

      The employers' association of electricity companies (Aelec, formerly known as Unesa) on Wednesday blamed the "lower" incidence of the gas cap on the final price of electricity on three circumstances of a "conjunctural" nature: the high demand "due to the heat wave", the low renewable production "due to lack of wind" and, ultimately, the greater need for gas generation, "which increased the cost of the subsidy".

      "The continued increase in the price of gas, the real problem of this crisis, will cause the cap to not show a reduction in electricity prices in the market with respect to the prices of the last few days. However, electricity prices in the wholesale market will be lower than if it had not been implemented," argues the association to which Endesa, Iberdrola and EDP belong. "In any case," it adds, "it is expected that the cost reduction results will be greater, once these circumstances are over." Until now, Aelec's position had been limited to a frontal criticism of the mechanism: "We continue to believe that there should be no market intervention", said its president, Marina Serrano, less than a month ago in an interview with this newspaper. She had no doubt, however, that in the medium term the price for customers in the regulated market or PVPC "will necessarily fall".

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