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    EU agrees to cut electricity consumption at peak hours by 5%.

    October 4, 2022 - CE Noticias Financieras


      Pressed by the evolution of gas and electricity prices and the fear of a social outbreak in the streets, the European Union yesterday adopted a new package of emergency measures to intervene in the energy market and tackle the problem from different angles.

      First of all, the European energy ministers committed themselves yesterday to "flattening the curve". They do not speak of contagions but of electricity consumption and aim to reduce the demand peaks that occur at certain times and that in countries like Spain force to spend more gas to generate electricity. The political agreement sealed yesterday commits governments to a mandatory 5% reduction in electricity consumption during peak hours.

      As expected, the final text of the regulation includes flexibility measures to allow member states to define what these extra hours are and how to meet the target. The Spanish government's objective is to concentrate the bulk of the effort to reduce consumption on industry and large consumers, not on individuals, and to this end it has approved the so-called interruptibility mechanism. The system, explained the Vice-President for Energy Transition, Teresa Ribera, will be operational on November 1 and will allow Red Eléctrica to take measures to "flatten the curve" and "not have to look for more expensive solutions to guarantee supply".

      Red Eléctrica will compensate customers who agree to 'unplug' with 15 minutes' notice.

      This system allows the operator to call auctions to compensate with a payment to consumers who agree, at a given time, to reduce their demand with a notice of only 15 minutes and for a maximum period of three hours. A reduction in electricity demand will ultimately result in lower prices for all consumers, Ribera said.

      The electricity savings plan will run from December 1, 2022 to March 31, 2023. Spain originally advocated that all electricity consumption reduction percentages should be voluntary but has endorsed the final commitment. The measure will be in force until June 30, 2023. Countries that wish to do so will be able to reach a 10% cut in their overall consumption, but this percentage is voluntary, not mandatory.

      The second element of the agreed European regulation consists of a cap on the profits of companies generating electricity with infra-marginal technologies (i.e. the cheapest currently entering the market: renewables, nuclear and lignite) at 180 euros per megawatt hour. The figure is a maximum calculated on the basis of the highest cost of electricity generation at European level, from lignite, and governments will be free to lower it.

      The European regulation allows Spain to maintain its energy tax model.

      The Spanish government already established a similar measure last year but with a much lower threshold, 67 euros. Like all countries that already have or are in the process of approving similar initiatives, the regulation is flexible enough to allow them to maintain their own design, so Spain will not have to make any changes to its national model. The same applies, as advanced by La Vanguardia , to the tax on energy companies on which the Spanish government is currently working. The political agreement reached yesterday by the ministers establishes a temporary "solidarity contribution" to tax 33% of the extraordinary profits of oil, gas and refining companies, defined as those exceeding 20% of the average recorded in the last four fiscal years.


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