March 29 -- The European Union has agreed to extend a cap on natural gas prices for power generation in Spain and Portugal until the end of the year.
Spanish Energy Minister Teresa Ribera explained that the decision will protect Spanish and Portuguese consumers. While the decision is still pending endorsement by the Commission, it has expressed explicit support for the move.
According to an Energy Ministry spokesperson, "The agreement enables the extension of this temporary mechanism that will cap the gas price at an average of 55 euros ($59.48) per megawatt-hour to 65 euros per megawatt-hour.”
The mechanism was introduced in the spring of 2022 under a joint scheme between Spain and Portugal when fossil fuel plants experienced skyrocketing electricity costs.
The extension is expected to cushion the effect of rising natural gas prices, which have been driven up following Russia's invasion of Ukraine. Since gas prices are currently below the cap, the mechanism is not applied.
Ribera suggested that this provision will allow electricity prices to be contained at reasonable levels in the event of an upswing in natural gas prices.
"Were natural gas prices to rise again, we would manage to contain electricity prices at a reasonable level that would not depend on the price of natural gas," Ribera explained.
The approval of the price cap extension is also expected to aid environmental efforts aimed at reducing carbon emissions in the energy sector in Spain and Portugal.
The extension is expected to have significant effects on energy policy in Spain and Portugal, and European Union lawmakers will continue to evaluate various energy policies to address the current energy crisis.
Through the price cap, the EU aims to ensure a transition to green and sustainable energy while stabilizing energy prices for consumers.