Impact of the gas price – Despite the electricity price cap, electricity prices are rising in Spain – News


The country has been able to limit its electricity prices for around three months. But the electricity price cap is not a panacea.

The EU is considering introducing an electricity price cap. Spain already has such an electricity price cap. The country has been able to limit its electricity prices for around three months. Spain is hardly connected to the pan-European power grid, produces a lot of electricity from renewable energy sources and is not very dependent on Russian gas. But a look at Spain shows that the electricity price cap is not a panacea.

A megawatt hour of electricity costs between 95 and 240 euros in Spain, depending on the time of day. In Germany or France it is several times higher, but the Spaniards also complain about the high electricity prices. “The prices should be lower, what we pay is outrageous,” says a young mother in the Spanish news.

Electricity prices high in relation to low wages

Despite the electricity price cap, there are financial concerns. According to Mario Sánchez-Herrero from the Universidad Complutense Madrid, this is because wages are lower in Spain than in Switzerland, for example. “Financially, the Spaniards therefore make greater sacrifices than the Swiss when electricity prices rise,” says the economist, who specializes in the energy market. The Spaniards would not compare themselves to Switzerland, France or Germany. “You compare with what you paid a year ago.”

Even with the price cap, electricity prices in Spain have risen by up to 85 percent compared to the previous year. Added to this is inflation of over 10 percent: because money loses value, purchasing power falls. Economist Sánchez-Herrero therefore fears a wage-price spiral.

Expensive gas distorts prices

“People demand higher wages, but when companies spend more, prices go up even more.” However, the expert notes that the electricity price cap works. Without a cap, electricity prices would be even higher.

But the cap alone is not enough: “We have to remove the gas from the equation that is used to calculate the electricity price.” A new market is needed in which expensive gas does not distort prices. “Now that the share of very cheap renewable energies is increasing, we should set electricity prices differently,” says the expert. Electricity prices in Spain and Europe can only be brought under control in the long term if electricity prices are decoupled from gas prices.

source site-72