The Council of Ministers has agreed on Tuesday to process the Government’s plan to stop the overpayment that power generation receives in the wholesale market through non-CO2-emitting power plants (hydraulic and nuclear) prior to 2005, which would translate into a cut of 1,000 million in the ‘dividends’ that the companies receive.
In this way, this draft law opens the way to the reform of the electricity market with the elimination of what are known as benefits that have fallen from the sky (windfall profit, in English) for these technologies of the mix energy, which was included in the coalition pact between PSOE and United We Can.
As detailed by the fourth vice president and minister for the Ecological Transition, Teresa Ribera, at a press conference after the Council, the measure, which will now be submitted to a public hearing for approval, will mean an annual cut of 1,000 million in the remuneration they receive the electrics.
The Government wants to compensate the impact that the rise in the prices of carbon dioxide (CO2) is having on the cost of electricity and to tackle the possible consequences that this could have on the recovery of the domestic and industrial economies, with reductions in the Electricity bill of around 4.8% for domestic consumers and 1.5% for large industry.
In this sense, he has argued that the benefits from the rise in CO2 prices should also have an impact on domestic and industrial consumers, and not only on the income statements of companies. “It is legitimate for companies to maximize their profit, but as a government we must ensure the interest of the Spanish. It is a mechanism that benefits consumers and investors,” he stressed.
With this draft bill, the electricity companies will have to affect the CO2 emission rights for these two types of generation in their production cost, for which reason they will be discounted from the wholesale market price.
According to the portfolio directed by Ribera, with these revenues from the mechanism, part of the electricity bill of severely vulnerable consumers in risks of social exclusion will be covered, with 10% of the total, while the remaining 90% will be used to finance the associated costs to the specific remuneration scheme for renewables, cogeneration and waste (Recore).
Ribera affirms that there will be no accelerated closure
On the other hand, the minister has indicated that she does not fear an accelerated closure of the nuclear park before 2035 by companies. He recalled that there are now prices of 50 euros per ton of CO2 and more than 80 euros per megawatt hour (MWh) in electricity, better even than when the agreement was reached [20 euros por tonelada de CO2 y de 50 euros por MWh] and that guarantee the “profitability” of these farms in complete safety.
The same sources indicate that the system is legally “robust”, with which it is intended to shield against the more than safe demands by the electricity companies, and is “compatible” with the internal energy and CO2 market.
The proposal does not harm any post-2005 plant or wings that have a regulated remuneration framework, as well as those that are eligible for auctions or any present or future investment initiative. Installations of less than 10 MW are also excluded. Specifically, it is estimated that it will affect about 85 TWh annually, of which 67% corresponds to nuclear generation, 29% to hydropower and less than 5% to wind power.
The National Commission of Markets and Competition (CNMC), the body in charge of the liquidations of the electricity system, will calculate and notify the amount of reduction for each installation. The amount will be paid quarterly.
On their side, market sources explain to Five days that any proposal to put a ceiling on nuclear and hydroelectric remuneration would have to be approved in Brussels, “where it will not be simple to justify the penalization of these non-emitting technologies.” The same sources warn that such measure would introduce a limitation of their competitiveness.
After the strong bleeding that the electricity companies suffered yesterday on the stock market, today they are falling again, although with less intensity. Iberdrola is the most penalized today with a decrease of 0.9% after taking a 2.4% cut yesterday while Endesa shares, which yesterday suffered a hit of 5.7%, today lose 0.13% and Acciona is flat after losing 2.6% yesterday at the close of the market.
To expedite the adoption of this mechanism, the Council of Ministers has authorized the urgent processing of the procedure for the preparation and approval of this draft law.
On the other hand, the Council of Ministers has also given the green light to the bill of the National Fund for the Sustainability of the Electricity System (FNSSE), which will now be sent to the Congress of Deputies and which aims to lower the bill by 13% of electricity in five years after removing the cost of premiums for renewable energies from the receipt.
According to calculations by the Executive, between the FNSSE and the lower remuneration for the generation of nuclear and hydraulic energy, domestic consumers could benefit from a reduction in the final cost of the electricity bill of up to 15%. In addition, the Government does not rule out that appeals are presented in court.
The Executive highlights that the evolution of CO2 prices has changed significantly since 2005. In recent weeks there has been an increase in the price of emission rights on the European market, where they are reaching values of more than 50 euros per ton , which represents an increase of 150% compared to the value of a year ago.
“This trend and the expectation that it will continue has increased the Government’s concern about the impact of the price of CO2 on the electricity bill paid by consumers and the burden that this situation may pose for the recovery of domestic and industrial economies” , indicate from Ecological Transition.