Rising electricity prices jeopardize technology sector investments in Spain

What was going to be something temporary is not going to be so. The escalation in electricity prices continues to increase and during this Monday the cost per megawatt per hour will reach 300 euros. The futures traded in the markets do not suggest a collapse, so during this year we will see the electricity bill under tension.

The rise in energy prices, in addition to being felt in inflation, is already having consequences in our country. The technology sector is suffering the consequences of the fact that the electricity bill has risen by almost 100% over the last year. "Obviously we are concerned about this situation, our costs have skyrocketed because we depend almost 24 hours a day on electricity," say sources in the telecommunications sector.

In this regard, Robert Assink, head of Interxion Spain. The cloud service provider explains to this newspaper that, although the company buys energy through the free market, "between 5% and 7% depends on regulated energy", which has had an impact of "1.5 million euros in just a few months".

The energy context, emphasizes the manager, can alter the most immediate future of companies. "There is instability in the market, it is not possible to plan profit and loss accounts or customer budgets," said Assink.

In this sense, the head of the company thinks that the legal security does not help "since the intervention of the State with the regulation in the wholesale market caused a restructuring with the contracts with the energetic ones", something that precipitated "that contracts are negotiated" with different prices and to have to alter the invoicing with those that receive the service of this type of companies.

"We have had to raise rates to customers. Our operating costs are 40% dependent on electricity. Hopefully this situation will pass as soon as possible so that everything returns to normal," Assink stresses.

The technology sector suffers

Against this backdrop, Interxion stresses that the energy sector is going through a difficult situation because "electricity planning is for five years, while data center investment plans are usually shorter, which creates uncertainty about the power available in certain areas".

They also stress that the current energy context is already "slowing down the arrival of investment by large cloud and data center providers in Spain. This will have an impact on GDP and job creation".

To this end, major companies in the technology or telecommunications sector paint a landscape with tortuous paths. "We continue to increase cloud or data services, which implies a need for more energy and we are going to increase spending. To reduce costs we are working on reinventing ourselves, on being more efficient," telco sector sources explain.

To reduce costs, Interxion is calling for technology sectors to be recognized as electro-intensive due to the enormous electricity costs. "This would give rise to exemptions in the IEE, making possible investment in regional projects more attractive," they point out.

The Association of Companies with Large Energy Consumption (Aege) recently warned that the current situation is forcing many companies to delay the investments they had planned for the decarbonization of their plants as a result of a "brutal increase in the cost of the electricity bill".

"The electricity price situation that electro-intensive industrial consumers are suffering is jeopardizing what should have been the year of recovery, which is already threatening to be an ordeal in 2022 due to the terrible consequences that the closure of factories would have for employment in Spain," they explained in a statement.

Impact of 30 million

The impact of the light was felt in the accounts of a company as important as Telefónica. The telecommunications company, which also has an important business in cloud services, reported that the increase in the price of electricity has cost Telefónica some 30 million up to September 30.

Ángel Vila, CEO of Telefónica España, Vilá blamed energy prices for about a third of the 9% reduction in operating income before depreciation and amortization (Oibda) recorded in Spain in the third quarter, which was 1.182 billion euros. The company expects energy prices to continue to have an impact in the coming quarters in Spain, although it expects them to decrease by mid-2022.