Price of electricity skyrockets €20 in one day to €172.78 per MWh on Wednesday

The price of electricity continues to soar in Spain and it will skyrocket to €172.78 MWh on Wednesday, reaching a new all-time high.

This is an increase of €20 in the regulated electricity market compared to the previous record, set on Monday at €154.16, and also €18 more than the price set for Tuesday, at €153.43. 

Costs have increased over the summer by almost €100, and this is the 14th time prices have hit new all-time records since mid-July. The previous one before then was in January 2012 at €103.76 per MWh.

Meanwhile, authorities are unable to stop the rising trend, as experts say encouraging renewables through legislation would contribute to lowering the bill.

Spain will not regulate market

The Spanish government recently stated that it would not step in to regulate prices. In a four-hour appearance before Congress, Spain's ecological transition minister, Teresa Ribera, said that doing so would be "against EU law."

In late June, Madrid lowered the VAT for electricity from 21% to 10%, while on Tuesday the Spanish government lowered the special tax on electricity from 5.1% to 0.5% and suspended the 7% tax on electricity production until the end of the year. 

Public electricity company not a short-term solution

Rising electricity prices have reignited the debate about whether a public electricity company would help prevent soaring costs.

Yet, according to the experts the Catalan News Agency spoke with, setting up a public company from scratch would be expensive and complex. This would only work in the long run, according to Rubén Sánchez, who works for the consumer rights group Facua.

Instead, encouraging the generation of renewable energy through legislation is regarded as the best short-term option.

Roger Medina, a researcher at Institut Ostrom, says that an electricity supplier that constantly receives public funding to keep prices low "would go against EU law because that would involve public aid incompatible with the market."

"A public company cannot at the same time act as operator and regulator of the market."

Sources at Barcelona Energia, a public electricity provider that has not been able to escape price hikes despite selling 100% renewable energy, say that "the current electricity trade system means that the global increase affects the purchase of all energy, therefore, of all suppliers, whether they are renewable or not."

Reasons for soaring costs

Attributed to the rising cost of the gas used by combined cycle power plants as well as carbon emission trading and the limited use of renewables, electricity is now much pricier than it was a year ago when prices decreased following a drop in demand during the height of the pandemic.

Experts warn that soaring prices are not going away any time soon. José Bogas, CEO of Endesa, the largest electric utility company in Spain, said in an interview that high prices will remain until the second quarter of 2022.

According to him, this phenomenon is neither the government's nor the companies' or the customers' fault. He argues that the same trend is happening across Europe, but that it is "slightly" greater in Spain due to the use of air conditioning.

Bogas is not alone in believing prices are here to stay, for now. "We have to get used to seeing these prices until the end of the year," Marc Bonet, who is in charge of business development at Barcelona Energia, told the Catalan News Agency.

'Lack of transparency' of some companies

New tariffs came into force on June 1, with higher, middle, and cheaper rates.

Spain's competition regulation authority (CNMC) expressed concerns that some companies made the most of these changes by raising prices by up to 30% more than what the tariffs allow without warning their customers.

CNMC denounces a "lack of transparency" of several companies – whose names have not been revealed – and calls for those affected to be compensated.