Eduardo González
The Council of Ministers approved yesterday the renewal until December 31 of the so-called “Iberian Solution” for the reduction of the price of electricity in the wholesale market, after obtaining the approval of the European Commission to extend this mechanism, which activated in June 2022.
Spain and Portugal have been governed since June 15 by the so-called “Iberian Mechanism”, which allows a ceiling of 40 euros per megawatt/hour to be established on the price of gas used to produce electricity. The application of this mechanism was possible after the European Council on March 25 approved the right of the two Iberian countries to manage their own gas reference prices for combined cycle plants, in view of the nature of “energy island” of the peninsula due to its very low interconnection with the European energy market.
The Third Vice-President Minister for the Ecological Transition and the Demographic Challenge, Teresa Ribera, announced yesterday in Brussels that she had reached an agreement with the European Commission to extend the Iberian mechanism until the end of the year, which allowed its subsequent approval in the Council of Ministers.
“It has been worked on and closed and we have the agreement and support of the European Commission,” declared Ribera upon arrival in the community capital to participate in the meeting of the Energy Council of the European Union, in which, among other matters, proposals (including the Spanish one) were discussed to review the design of the EU electricity market in order to make it more “resilient and stable” and protect consumers and businesses from short-term electricity price volatility. Likewise, the ministers promised to move quickly on the proposals presented and the Swedish Presidency reiterated that the reform will be treated as a priority and that everything possible will be done to move quickly on it.
The extension of the Iberian mechanism, Teresa Ribera clarified in the same statements, still depends on the “formal” approval by the Commission, but the community executive, she assured, has already given its “explicit support”, so this tool ” It will allow us to continue protecting Spanish and Portuguese consumers until the end of the year”. The Spanish government had requested in February that the mechanism be extended until the end of 2024, but, finally, the Commission decided to extend it for only six months.
During the press conference after the Council of Ministers, the First Vice President and Minister of Economy, Nadia Calviño, announced the approval of the extension of the “Iberian Solution” after intense negotiations with the Commission and assured that the Iberian mechanism “has allowed decouple the price of electricity from that of gas” and, therefore, has contributed to containing inflation.
According to Calviño, since it was put into operation until the end of January this year, the mechanism has led to savings of more than 5,100 million euros for all electricity consumers, both domestic and SMEs, the self-employed and large industry. He also assured that, in the current context in which natural gas prices are below the reference price of the Iberian solution, the extension of the mechanism provides Spain with “a safety net for consumers in the event that the Natural gas prices will pick up again between now and the end of the year.
