In recent years, the price of electricity in Spain has reached unprecedented levels, causing concern in millions of households and businesses. What once seemed like a manageable electricity bill now represents one of the largest expenses in the monthly budget. The question many are asking is: Why doesn't the electricity bill stop rising in Spain? The reasons are many, but they are mainly related to international factors, the structure of the energy market and environmental policies. Below, we will explain the main causes and what the price of electricity depends on in order to understand this phenomenon and how we can face this challenge.
What does the price of electricity depend on?
The price of electricity does not respond to a single factor, but is conditioned by various variables that interact with each other. Among the most notable are the costs of gas natural and CO2 emissions, the energy demand at specific times and the influence of the renewable energyOther key elements include government regulations, the structure of supply and demand in the market, and geopolitical factors such as the ongoing war between Russia and Ukraine. Below, we look at these factors in more detail and how they affect the final price we pay each month.
1. Increase in the price of natural gas
El gas natural It is one of the most widely used sources for generating electricity through combined cycles. When the price of gas on international markets rises, the price of electricity does too. The main cause of this increase is the interruption of supply from Russia due to the conflict with Ukraine, which has caused Europe, including Spain, to depend on other more expensive suppliers such as Algeria. As a result, gas has reached over 1000 euros. 200 euros per MWh at some points last year.
2. Impact of the marginalist electricity market
The electricity pricing system in Spain follows the model marginalist, in which the most expensive technology that comes into operation to meet demand is the one that sets the final price. This means that although a large part of the electricity is produced with renewable energy, it is the price of gas, which is more expensive, that ends up setting the cost paid by consumers. In other words, although a greater proportion of electricity comes from cheap sources such as wind or solar, if demand requires resorting to combined cycles, the out-of-pocket cost will be much higher.
3. Rising cost of CO2 emissions
To combat climate change, the European Union has implemented a scheme CO2 emission rights. Plants that rely on fossil fuels such as gas or coal have to pay for every tonne of carbon dioxide they emit. These fees have become more expensive in recent years, and the cost has exceeded 90 euros per tonneAs with gas, this increase has a direct impact on consumers' bills.
4. Increased demand for electricity
Demand for electricity is another crucial factor. During heat or cold waves, when the use of air conditioning or heating increases, distributors must generate more electricity to meet demand, which pushes prices up. This phenomenon is mainly observed during peak hours, when electricity consumption is higher, which can translate into higher costs.
Why the electricity bill keeps rising in Spain
The sum of all these factors has created a perfect storm in the rise in the price of electricity. Below, we analyze the specific factors that have caused the electricity bill to continue to rise in recent years.
- El conflict between Russia and Ukraine has played a fundamental role, driving up natural gas prices and, consequently, raising the price of electricity. This has generated historic increases in the price of MWh in the Spanish wholesale market, reaching peaks of € 400 / MWh.
- El increase in energy consumption During extreme weather events, it also has an impact. For example, during winter, the use of electric heating grows exponentially, which increases demand and, consequently, the price of electricity.
- La reduction in renewable energy production In certain months, due to a lack of wind or sun, prices also rise. Renewables are cheaper, but when not enough are generated, more expensive and polluting energy sources must be used.
- The CO2 emission rates The levies are paid by large emitters such as gas and coal plants. The increase in these charges, as part of the European policy to reduce emissions, has contributed to the increase in the costs of electricity production.
Government regulations to mitigate the impact
To curb the impact of rising electricity prices on homes and businesses, the Spanish Government has implemented a series of measures since June 2021, the best known being the gas price cap, also known as the Iberian exception. This measure limits the price of gas used to generate electricity to between 40 and 50 euros per MWh, with the aim of reducing the overdependence on combined cycles. In addition, the government has approved a reduction in the 5% VAT for domestic consumers and the creation of New categories of the electric social bonus.
El electric social bonus has been one of the fundamental pillars of this strategy, offering discounts of up to 65% to consumers considered vulnerable, and up to 80% for those in a situation of severe vulnerability. This bonus has also been extended to new categories of low-income households, thus benefiting more families that may be considered energy vulnerable.
These initiatives are joined by other policies to improve the country's energy efficiency in the long term, such as policies to promote consumption and subsidies for the installation of photovoltaic energy.
Other measures to reduce electricity bills
In addition to structural measures to avoid massive increases in the short term, consumers can also implement a number of strategies to reduce their electricity consumption and, therefore, their bill. Some of the most effective ones include:
- Improve energy efficiency: Choosing energy-efficient appliances with class A energy certification can significantly reduce consumption.
- Installation of photovoltaic systems: Self-consumption through solar panels is one of the most sustainable and economical alternatives, as it allows you to generate your own energy and reduce dependence on large electricity companies.
- Optimizing consumption schedules: Using appliances such as the washing machine or dishwasher during off-peak hours (early morning or weekends) can make a difference in the final bill.
It is clear that the rise in electricity bills in Spain is due to a combination of international, national and structural factors in the electricity market that affect both domestic consumers and businesses. However, with the right measures and a greater commitment to renewable energy, it is possible to mitigate this impact in the near future.