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By G. Uth – 23. September 2021 – 

The effect of Sanchez’s

“Shock interventions” against extremely high electricity prices. 

Last week, the Spanish government’s so-called shock-intervention on high electricity prices came on the market, and Sanchez and his Sanchizos promise that the measures mentioned will reduce your invoice by about 25% 

Let’s try to take a look at the interventions and see the effect on a typical English-Spanish electricity bill with a monthly consumption of 450 KWh, i.e. an electricity bill of about 100€ 

The main features of the funds used are as follows:

Extension of the absence on the production tax on energy, 7% – the tax was actually cancelled until September 30th, but is now being extended to December 31st. 

Saving: 0,00€

but in return, your bill does not increase by 7% + taxes after September 30th 

Reduction of the electricity tax from 5.11% to 0.5% – 

Saving: 4,05€ before taxes

Reduction in the income from renewable energy sources. The gains made by this will have no impact on customers, as it must be used to minimise the electricity deficit. It is the general assessment in the industry that it may actually have the opposite effect on the market price, as the price at the production stage is likely to be pushed up for the same reason. 

Saving: €0.00 – possible increase in price 

Prices of Potencia are reduced: 

Saving: €0.75 before taxes  

Prices of electricity transport (distribution) are reduced during the three periods by P1: €0.101607, P2: €0.020321 and P3: €0.005080 per KWh  

Saving: €14.86 before taxes  

Compulsory auction, in which the major producers have to sell a certain percentage of their production. 

Saving: €0.00 

That is, right now. This Electricity Exchange is so far only at the planning stage, even though it is in the legal text and it does not seem so well thought out. 

The government believes that it should be auctioned on the same terms as on the Futures Exchange’s “Forward” product.  

It’s a bit convolous to explain, but usually some pretty hefty guarantees have to be made when buying “Forwards”, and if that’s the idea, then there aren’t very many independent electricity suppliers that can join in, after all their liquidity has been drained away during the last year, so it’s probably just Iberdrola, Endesa,  Naturgy, EDP etc. that are going to sell to each other. But let’s see. The time of miracles is not over yet. 

Thus, the estimated total effect on a standard Danish-Spanish invoice is around 19.81€ 

This is the immediate effect of the government’s “shock package”, but somewhere the shock must lie in how little effect the package actually gets on your electricity bill – it will not be lower in the long term, but in return it will only be so slightly less high when it increases next time, because since this “shock package” came into force on September 14th, the average price on the market (OMIE) has increased from 137.71€/MWh to 164.5€ per MWh,  i.e. an increase of 27€ per MWh, which actually brings your next bill to 94€ and if you look a little in the crystal ball, the futures markets expect that the average prices in October and November will end up in 176 and 175€, respectively, and then your electricity bill will then return to 100€ – and if the industry gets right in the sense of the reduction in the revenues of the green producers come to increase prices,  Your bill ends up being higher than it was yesterday. 

The only way to slow down the soaring prices is to change the algorithm used on the stock exchange. We’ll explain more about that when we next talk about why prices are as high as they are.

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