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    Electric utilities pull water to generate electricity on gas cap opening day

    June 15, 2022 - CE Noticias Financieras


      The Spanish electricity system will open the floodgates to generate electricity on the day on which the gas price cap on combined cycle plants is introduced for the first time. Specifically, during most of the day, the energy that will enter the system will be hydraulic and only four of them will use gas to feed the energy mix.

      All this takes place in the middle of a heat wave and at the gates of a summer that is predicted to be very dry, so the capacity of the reservoirs could have serious consequences. The Spanish water reserve is at 48.2% of its total capacity. The reservoirs currently store 27,040 cubic hectometers (hm³) of water, decreasing in the last week by 449 cubic hectometers (0.8% of the current total capacity of the reservoirs), according to the latest data from the Ministry of Energy Transition.

      This situation is very similar to that of last year, when in the midst of the rise in the price of electricity and with the reservoirs below the usual average, Iberdrola decided to open the floodgates and generate electricity through hydraulic technology. This fact led to an investigation by the National Commission for Markets and Competition and the reprobation of the Minister of Energy Transition, Teresa Ribera.

      Specifically, the main company in the sector reduced the level of hydroelectric reserves by more than 30% in the third quarter of 2021 compared to the same period of the previous year, according to figures provided by the company.

      Turning to the technologies that set the daily market marginal price on Tuesday, hydro set 17 of the 24 hours at a price that hovered between E177 and E183, according to data from Spanish electricity operator Omie. Energy sector sources point out that the real cost of electricity generation is around 60-65 euros per megawatt per hour.

      So why was it paid up to that amount? Because the Spanish system is made through a matching process in which electricity generating companies and trading companies launch their offers each day for each hour of the following day. The balance between supply and demand determines the price. The cheapest energies, such as renewables or nuclear power, have priority. And the most expensive ones, such as those generated in combined cycle power plants or coal, are the last to enter the system. The final price paid for this energy to all power plants is determined by the last supply that meets demand.

      More expensive electricity

      Despite the fact that this Wednesday the price of the mix has plunged 23% and has gone from 214 euros to 165 euros in 24 hours, the fact is that the extra cost that has to be paid to the combined cycle power plants (gas) caused the cost per megawatt to increase to 224 euros, which means increasing it by 5% more.

      The Ministry of Ecological Transition explains that "the heat wave has raised demand by almost 80 GWh, there is little wind production (it has fallen to 78 GWh) and the gas plants will reach tomorrow their maximum production in the last year, 373 GWh. As a result of these exceptional circumstances, the cost of the adjustment has risen to E59/MWh, which brings the total price to E225/MWh, still below what it would have been without the mechanism, around E240/MWh".


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