The spectacular increase in the price of electricity in Spain will mark this Wednesday, July 21, its highest ever since there were records. At nine in the evening that day, the price of megawatt per hour will reach 110.66 euros.
These levels, unprecedented in recent decades, have made Spain the country of the European Union (EU) in which the more the price of electricity has increased. According to Eurostat data corresponding to the month of June, electricity in the country was 37.1% more expensive than in the same month last year.
Inflation, and in particular the price of electricity, remains the hot topic, and everything indicates that it will continue to be high. Small 🧵With daily data, the price of MWh in July indicates that it will be higher than 90 euros, against 35 a year ago. pic.twitter.com/ciOFzGezbh
– Angel Talavera (@atalaveraEcon) July 20, 2021
To lighten the pockets of the Spaniards, the government this month put in place a tax reduction which reduces VAT on the electricity bill 21 to 10% for consumers with contract power of 10 kilowatts or less, provided the wholesale price exceeds 45 euros per megawatt.
However, the measure is still a temporary tool, a “patch,” as critics have described it, and President Pedro Sánchez’s cabinet is expected to explore structural measures to alleviate this energy crisis.
Problems of price formation and gas in the spotlight
The electricity bill in Spain presents several problems. One of the main ones is the way in which the price of energy is formed: everything is paid for at the price of the last to enter the market, which is always the most expensive, gas. Thus, energies such as hydroelectric or nuclear, which are much cheaper, are overpaid by receiving the same price as gas, which has associated costs, such as tolls for CO2 emissions.
Thus, energy sector expert and director of Próxima Energía, Jorge Morales de Labra, told MRT: “More than 80% of energy production has nothing to do with natural gas. or CO2. using this excuse to inflate the income that other types of factories receivelike nuclear, hydroelectricity, solar, etc., which represent around 80% of the country’s production, ”he explains.
Experts predict that these high prices will persist for some time as the price of gas will continue to be expensive internationally as many countries are currently replace coal with gas. In addition, the fall in prices is expected to occur very gradually as the construction of renewable energy infrastructure progresses.
According to data from the Red Cross, nine out of 100 people in Spain, they cannot have their house at the right temperature. Fuel poverty mainly affects women (68%) and has a high incidence in households with children under 16 (48.9%).
However, on the other side of the scale are the huge benefits collected by companies that are part of the energy oligopoly Spanish. Today, we know that Iberdrola earned around 1,300 million euros net in the first quarter of the year.
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