Current Iberian Peninsula prices justify electricity interconnections through new investment

In the draft communication on the REpowerEU energy package, which should be released on Wednesday and to which the Lusa agency had access today, the EU executive estimates that are "needed more 29 billion euros in additional investments in the electricity grid [European] by 2030, to make it suitable for greater use and production of electricity", infrastructures in which include Iberian interconnections.

For Brussels, "current high electricity prices on the Iberian Peninsula underline the importance of improving cross-border electricity interconnections as a cost-effective way to ensure a secure and affordable electricity supply."

Therefore, according to the draft communication to which Lusa had access, "the Commission will continue to support and encourage the Spanish and French authorities to accelerate the implementation of the three existing projects of common interest through the High Level Group South West Europe, with the aim of increasing interconnection capacity between the Iberian Peninsula and France".

At issue is REPowerEU, the plan to increase the resilience of the European energy system and make Europe independent of Russian fossil fuels before 2030, following the Ukraine war and supply problems.

The plan then aims to diversify supplies, replace fossil fuels through the transition to clean energy, combine investments and reforms, and also save energy, goals aligned with the Goal 55 program, which envisages a 55% reduction in pollutant emissions by 2030.

In the communication, the EU executive presents a list of projects of common interest for "an interconnected system with a greater share of renewable energy sources," at the electricity level.

And here are the "Iberian interconnections and connections for island member states, [which] have been in preparation for many years."

"These projects must now also be accelerated to complete the European infrastructure," the European Commission points out in the document.

The European Commission's communication comes at a time of conflict in Ukraine sparked by the Russian invasion, geopolitical tensions that have put pressure on the European Union's electricity market, with prices hitting record highs.

Data from Brussels shows that electricity inflation has risen from negative rates in the first quarter of 2021, to 34.3% in the first quarter of 2022.

In the current configuration of the European market, gas determines the overall price of electricity when it is used, since all producers receive the same price for the same product - electricity - when it enters the grid.

This is why Portugal and Spain reached a political agreement with the European Commission on a temporary Iberian mechanism to cap the price of gas for electricity production, which still needs formal and final approval from Brussels.

In the REpowerEU communication, the EU executive also stresses that "energy storage plays a significant role in ensuring flexibility and security of supply in the energy system, facilitating the integration of renewable production, supporting the grid, and shifting energy to when it is most needed.