Record sale of electricity to France contributes 620 million to lower electricity bills in Spain

Spain smashed its record electricity exports to France last year in the midst of the energy crisis. With half of France's nuclear power plants shut down for months due to technical problems, the shipment of electricity produced in Spain has soared to record highs to guarantee supply.

The electricity interconnections linking the two countries have been used to the maximum of their capacity to bring energy to France - operating at the limit for 99% of all the various hours in recent months - at a time when the price of electricity in Spain is well below that recorded by the French market thanks to the effect in recent months of the 'Iberian exception' (the mechanism that since mid-June sets a maximum price for gas used to produce electricity in Spain with the aim of lowering the price of other generation technologies).

The record exports of electricity to France and the growing difference in prices between the two markets is also causing the fees that electricity companies must pay for using international interconnections to be much higher. The so-called congestion rents are calculated precisely on the basis of the amount of energy transported through the international cables and the electricity price differential between the two countries.

Until the 'Iberian exception' came into force, the congestion rents accruing to Spain were used entirely to finance the costs of access tolls for Spanish electricity networks. But since last June, the Government has allowed part of this income to be used directly to pay the compensation received by gas-fired power plants for the 'Iberian exception' (these plants are paid for the electricity they produce based on the real price of natural gas, without the cap on other technologies, so that they do not produce at a loss), thereby reducing their impact on the price of electricity paid by Spanish consumers.

The more electricity that is transported and the greater the price difference between the two markets, the more revenue is shared equally between Spain and France. And since during the last few months the interconnection has been used the vast majority of the time to export electricity to France, it is the French consumers who bear the cost of these charges. Spain has received in the second half of 2022 some 935 million euros in congestion rents since the gas cap was implemented (half of the 1,870 million in total), according to the records of OMIE, the electricity market operator.

And of that amount received, Spain has allocated more than half to pay part of the compensation to gas plants and, with it, to reduce the final price of electricity in the Spanish market. Specifically, between June 15 and January 30, 618.8 million from congestion rents have been injected to reduce the adjustment to compensate gas plants , according to data from the Ministry for Ecological Transition to which El Periódico de España, of the Prensa Ibérica group, has had access.

Who pays the fees?

The capacity to use the interconnections is awarded through annual, monthly and daily auctions attended by companies that can be both exporters and importers of electricity, and which end up passing on in the price of electricity the cost assumed for using the networks between the two countries. But in the end, those who end up assuming this cost are the end consumers of the country that imports the electricity, which in recent months have been French customers, as confirmed by the electricity sector.

French consumers benefit from the lower price registered in the Spanish electricity market through these exports and also because they do not directly pay the compensation that Spanish customers do pay to electricity companies with gas plants to cover their real costs. But they are bearing the bulk of these costs of congestion rents that are being partially used to reduce the cost of compensation to gas plants.

The PP has been criticizing the 'Iberian exception' for subsidizing cheaper energy to French consumers and because in order to cover the extra demand for electricity to cover the boom in exports to France, gas plants are being used more and the price of the compensation adjustment is rising.

The Government, on the contrary, defends that the Iberian exception works, underlining that in the four months that the Iberian exception has been in place - it came into force last June 15 - Spanish consumers have saved almost 4,600 million euros by managing to contain the wholesale electricity market price (at a rate of about 150 euros per customer), even with the compensation paid to the gas plants. These 4.6 billion include the 619 million used to reduce the cost of the adjustment for gas plants from congestion rents.