Recall that the electricity market price formation is done every hour of the day by starting up the power plants, from the cheapest to the most expensive. That is, the price of the market or the pool works marginally, so that technologies come in order of cost and the last of them to participate, the most expensive, sets the price for the whole or offer/demmand marriage price . Come on, the power plants offer their energy depending on their opportunity costs, but then all the plants charge the price of cassation. What, then, do the prices at which producers offer their energy depend? The cost does not represent the variable cost of producing such energy, which would be a sum of the cost of the fuel, plus the costs of operation and maintenance of the plant. Because the offer is made at the opportunity cost of generating that electricity. Which means that, at the previous variable cost, you have to add the revenues that the plant would give up for producing, regardless of the excess cost (the more profit, the better).
Minister of Energy Mr. Nadal released two weeks ago 2017KW04, (26-ENE-2017) late in the afternoon, a statement in which it says that the causes of the rise in energy prices respond "to a context of higher prices of international raw materials, the Cold Wave, the absence of Rain or Wind, the Nuclear breakdown in France, certain problems in the origins of Gas supplies and the euro/dollar exchange rate."
Source: Economía Digital
To understand it better we will give the example of two hydraulic power stations, one of reservoir and another flowing one (it only operates with the water that passes through the river). For a reservoir plant, consuming water to produce electricity does not involve any variable cost, but an opportunity cost. This is so because thanks to the reservoir, the generator has the possibility to store the water and consume it in the future, when the market price is higher. For that reason the reservoir hydraulics can sell the electricity when it suits them and for that reason they will offer to a high price in comparison with the rest. However, in a time of heavy rains, if the reservoir is at capacity limit, the opportunity cost will be zero for the amount of energy it can generate with the water that is required to evacuate. Therefore you will make offers at a very low price or even zero, to ensure that you enter the offer/demmand price cassation.
In the case of a flowing power plant, fuel is water that is free. Therefore, if you have the opportunity to generate, in a situation of water in the river, not doing so will not increase the possibility of doing so with greater benefits in the future, since neither save on fuel nor can store it for another time . So you will bid at a very low price or even zero just like before, to make sure you get married.
This could be applied to combined cycle plants, which are rather costly. But when, as during this winter, the market has been affected by a set of circumstances - increased demand, a cold wave, export to France due to its nuclear unavailability, little water for hydraulics and little air for wind turbines - Supply is made at a higher cost, affecting the market price since it is its marginal cost that is applied in many of the hours of higher demand.
Therefore, it is clear that in the cost of producing electricity, in one case as in another, market rules intervene, since each actor seeks his own benefit, regardless of the exorbitant price increase. It is clear that this way of regulating the price is not adequate to keep them stable, and that solutions should be found so that consumers pay only what ensures producers a reasonable profitability. So that there are no windfall profits or profits from the sky (which are paid to some technologies), a consequence of the opportunity costs that are always generated at the expense of users, who pay the electricity.
It is the job of politicians to find the way in which an essential service is not susceptible to manipulation or speculation, changing the current rules that have proved to be inefficient, since neither domestic nor industrial consumers can be on the brink of marginalist auctions in which command the opportunity costs.
Improvements in energy intensity and energy efficiency are still far from achieving our climate goals. Analysis in IEA last Energy Efficiency report emphasises that policies must be strengthened and their coverage expanded to boost the potential of energy efficiency. Government policies are vital to curbing the risk that lower energy prices could undermine energy efficiency efforts. High energy prices cannot be relied on as a main factor driving investments in energy efficiency. Equally, low prices should not diminish the case for efficiency to be at the forefront of national energy policy. Efficiency policies, properly integrated with renewable energy policies, will need to continue to expand and strengthen even at a time when the short-term pressure to act may be diminished.
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Harnessing the potential of energy efficiency is key to transitioning to a sustainable and secure energy system that generates prosperity for our world.
Right now, in Spain, about one in three kWh is generated by renewable sources
And clean sources of energy (Sun, Wind, Water) are not subject to the ups and downs of international markets. If instead of generating in our solar photovoltaic (PV) installations only 3.02% of the electricity (as ER did last year), Spain generated more than double, as in Italy, the natural gas needs would be lower and the effect of the gas price increase would also be less severe. If instead of having 4,425 MW of installed Solar PV power, we had 40,000, as in Germany, the effect would be the same: less need to import, or less energy bill as a country. The many regulatory changes implemented by the Government during the last legislature and the bottleneck of self-consumption have, however, prevented the growth of renewable generation (ie energy independence) and have led to a change of sign in the markets to a strong increase in electricity prices.
These are two of the causes of the increase in the price of light: the countries that sell us raw materials (gas and oil) have suffered a price increase in their products; And, on the inside, the Executive Rajoy has discouraged investment in renewable facilities (and that, as in the case of self-consumption, these facilities do not need - and are not asking for - subsidy or aid).
But there are more causes. And the absence of rain and wind is one of them. That yes: neither is the most important, nor is it completely true
Because it is a lie that in Spain (505,940 Km²) Wind has not blown during these days (Wind has gone down, yes, but it has not stopped, and in any case it has not gone down as much as for justify the huge increase in the power price). What is true is that in Spain there is less renewable power (less PV, less Wind producing clean kilowatt hours) than there could be if the legislative framework were more conductive. And it is a legislative framework (not aid or subsidy) because now there are investors in the starting grid that would be running facilities if that regulatory frame contains no uncertainties. In any case, the question is: what do you prefer as citizen? to pay foreign power - Algeria, Qatar, Nigeria - a millionaire bill every time the cold starts (pay indefinitely, since Spain will never have gas and/or oil) or the little cost of a new regulation framework for the promotion of nativ renewable energies (some of which do not even need aid anymore).
Nuclear stop is not the big reason for electricity rise price
That is another of the recurring lies that the Executive Rajoy and surroundings wields each time they paint coats. And there are the Spanish and French operators, Red Eléctrica de España and Réseau de transporte d'électricité, to demonstrate that lie year after year. The interconnection with France is very small and therefore the electricity that our neighbor sends us is very little. Last year, for example, the French sent us 9,189 GWh, when demand registered here was 250,266 GWh.
Conclusion?
Only 3.67% of the kWh we used last year in Spain carried the "Made in France" sticker. It should also be noted that in France, surprisingly, there are also Wind farms, PV facilities, Swamps,Thermal power plants that burn natural gas, coal plants, etc. That is, not all the electricity that comes from the neighbor is nuclear. According to the French operator, about a quarter of the electricity generated by France came last year from gas-fired power plants, wind farms, PV solar plants (in fact, there is more PV power installed in France than in Spain). In fact, of the 9,189 GWh sent to us by France last year, and in view of the French electrical mix (which is diverse, such as Spanish), approximately 2,300 came from non-nuclear installations. That is, only about 6,900 were of nuclear origin. That is 2.75% of the total electricity used by Spain (250,266 GWh) in 2016. As can be seen, the weight of French nuclear power in the Spanish electricity system is minimal, so it does not explain, nor can it explain Neither, the brutal increase that has experienced the price of electricity these days. In fact, during the days when electricity was most expensive in January, French nuclear production was identical to French nuclear production in January last year (even on some days in January 2017 it has been somewhat higher To that registered by the French operator on the same days of January 2016, according to Réseau de transport d'électricité). Finally, the Ministry of Energy recalls in its statement that "what we are experiencing these days is not a novel situation and that the upward behavior of electricity prices is recurrent and is repeated from time to time." The question is then ... what has served the energy reform implemented by the Rajoy Government or ... what is the purpose of the measures now announced?
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| Spanish Power Peak Prices |
to The Ministry informs in its note, on the other hand, that "it has already carried out actions to compensate for the rise in prices, such as having frozen the regulated part of electricity receipt in 2017." The government now says that it is freezing the regulated part, but the fact is that it freezes (zero percent increase) after having risen to more than 100% in some sections, something that Mr. Rajoy Executive did in the 2013/2014 bianual period, in the hardest critical moments and with much lower oil and gas prices. In addition, the Ministry continues, "the Government has decided to promote a series of actions to boost this market [gas], improve its liquidity and increase supply." And will not we be delving deeper into energy dependence? Because Spain imports 99% of the natural gas it uses, according to recently explained in Spanish Television Marta Margarit, the general secretary of Sedigas. He have only 7 days of gas autonomy!. Are we going to import more gas, whose price we do not control, to lower the price of electricity?
Finally, the Ministry of Energy concludes its note saying that "to supervise the markets corresponds to the National Commission of Markets and Competition and, for that, on December 30, 2016, Minister Nadal sent his president a letter requesting a thorough investigation of both markets." The statement was released weeks ago by the Ministry after Minister Álvaro Nadal appeared in Congress before the Energy, Tourism and Digital Agenda Commission, during which he insisted that electricity has become more expensive due to some of the reasons Press release, the rise in the price of oil and gas and, above all, because of renewables, which were "immature and expensive" when they were installed and have left us a mortgage that we will have to pay for decades. In short, the same speech - exactly the same - that used the Executive Rajoy during the previous term, when it had a large absolute majority. Nevertheless Mr. Rajoy is by no means guilty if Rain doesn't fall or Sun doesn't shine or even if Wind doesn't blow.
Sources: Antonio Barrero F. IEA, Eduardo Collado
