The price of Spain's electricity increases twelve times more during natural gas shortages

Researchers astatine the UOC's Finance, Macroeconomics and Management (FM2) group, which is led by Jorge M. Uribe, unneurotic with Stephania Mosquera, a subordinate of module from EAFIT (Escuela de Administración, Finanzas e Instituto Tecnológico) University successful Colombia, person designed a statistical model that shows the grade of the knock-on effect of state terms changes connected energy prices successful periods of comparative energy procreation scarcity oregon abundance.

"This emergence successful electricity prices tin beryllium explained to a large grade by the historic peaks in international earthy state prices that we are seeing, which are successful crook driven by higher existent request from Asian countries as they permission the antagonistic economical effects of the pandemic behind," explained Uribe, who is besides a subordinate of the UOC's Faculty of Economics and Business.

When request for electricity cannot beryllium initially met with greener sources, thermal powerfulness plants marque their capableness available to the market. According to Uribe, though they are overmuch little businesslike astatine generating energy than renewable sources, these plants are presently indispensable to alteration the strategy to warrant a proviso of energy to anyone who needs it, preventing the unspeakable consequences that would different originate for the payment of some radical and the economy.

The question is whether the existent rises successful energy prices are a temporary phenomenon or a permanent feature of the market. This is not an casual question to answer, arsenic it relies connected factors successful the fields of politics, technology, economics and climate. "These are each precise analyzable systems erstwhile taken connected their own, and it goes without saying that this complexity and trouble of investigation are greatly accrued erstwhile looked astatine together, thing that has to beryllium done successful bid to recognize the energy market. However, we tin analyse the disposable information to get a preliminary thought of what tin beryllium expected successful the future," helium said.

Uribe explained that the caller model, which involves a acceptable of indicators relating to marketplace prices and a assortment of clime variables, makes it imaginable to found the natural-gas-to-electricity terms transmission ratio in periods successful which energy is comparatively "cheap" and successful those successful which it is comparatively "expensive". The radical of researchers analyzed energy marketplace information from 13 European countries over 10 years (from 31 March 2011 to 3 September 2021), arsenic good arsenic information from the Henry Hub general earthy state terms index.

"We've noticed that, if the effect of the look is simply a number greater than one, this means that the terms of earthy state has a greater effect connected the terms of electricity when the second is costly than erstwhile it's cheap," stated Uribe. "If the narration betwixt the 2 prices ever remained the aforesaid careless of the terms of electricity, a aboriginal simplification successful earthy state prices would beryllium capable to spot a proportional driblet successful energy prices," helium added.

However, the effect of earthy state connected energy varies greatly betwixt the countries nether analysis based connected whether they are markets with comparatively scarce oregon abundant energy generation. In different words, successful the countries nether analysis, changes successful state prices bash not person specified a superior knock-on effect connected energy prices successful these 2 marketplace scenarios. Some countries are peculiarly susceptible owed to the configuration of their energy markets. Such countries not lone endure from overmuch higher energy prices during periods of insufficient energy procreation but besides bash not conversely bask a proportional driblet successful energy prices during times of state abundance and stocking up.

The configuration of the Spanish and Portuguese energy markets results successful a much unstable narration betwixt prices

According to estimates, the fig for Spain is 12.4, which is the effect of dividing the effect of earthy state connected energy erstwhile the second is costly (this effect is 7.35) by the effect erstwhile it is inexpensive (this effect is 0.59). "This ratio intelligibly shows that the price is much greatly affected upwards (when prices thin to beryllium high) than downwards (when prices thin to beryllium low). The knock-on effect is 12.4 times greater erstwhile energy is expensive. In different words, successful markets with abundant energy generation, the rises are ne'er offset by falls by the aforesaid proportion," warned Uribe.

This ratio is greater than 1 for astir each state included successful the sample, but with huge variations ranging from Finland's 0.8 to Portugal's grounds 18.6. In fact, applying the projected models provides a informing regarding the request to summation a amended knowing of the terms enactment mechanisms of the Iberian peninsula's energy market, which person the highest ratios by far, and astir the request to advance nationalist policies that support the astir susceptible energy consumers from the types of unwanted economical consequences we are present seeing. 

"In a 'marginalist' pricing system such arsenic the 1 utilized successful Europe's energy markets, and specifically successful Spain, it's the astir costly and inefficient procreation that yet determines the terms paid to each sources of generation. This means that, to the grade that thermal powerfulness plants walk connected the other outgo resulting from higher earthy state prices to the terms of the powerfulness generated by them, the energy prices paid by households volition beryllium straight affected by the terms of earthy gas," explained the expert.

This is key, peculiarly if you see that, successful fact, upward pressures connected energy prices thin to summation successful the abbreviated word owed to the vigor modulation towards greener vigor sources that European countries are presently immersed successful and that tin nary longer beryllium delayed. Such pressures volition beryllium accompanied by the EU communal regulatory framework's restrictions connected CO₂ emissions, which volition go greater and pb to akin dynamics to those seen since precocious 2020 successful the prices of pollutant state emanation rights, which person besides reached historical highs aft remaining unchangeable for decades. It volition beryllium precisely thermal powerfulness plants that volition beryllium much earnestly affected by this excess cost, arsenic they necessitate these rights successful bid to operate.

Nord Pool, an illustration of energy marketplace integration

The results of the FM2 group's probe suggest we should research different forms of marketplace enactment that are much interconnected some physically and economically and regionally and internationally. "See, for example, however the terms transmission ratio for the countries forming portion of Nord Pool, Europe's astir integrated market, which see Denmark, Sweden, Norway, Latvia, Lithuania, Estonia and Finland, is usually little than for different countries," noted Uribe. 

The Nordic markets person overmuch much unchangeable terms ratios successful cases of antithetic marketplace configurations than Portugal and Spain. "This is due to the fact that the much highly integrated markets pb to a amended coordination of proviso and request and assistance mitigate the outer daze effects of the fossil fuels imported by Europe," helium noted.

It appears that marketplace integration volition beryllium cardinal to knowing terms enactment mechanisms successful the Spanish energy marketplace and the plan of nationalist policies to support the astir susceptible from immoderate adverse effects successful these markets.

Above all, these results suggest we should reconsider the government's important relation successful ensuring a creaseless vigor transition with voters' support, a indispensable request for its sustainability. "In fact, we should not beryllium shocked that more expensive electricity is however the world has to operate successful the abbreviated word successful bid to bash truthful much sustainably until we tin travel up with much businesslike ways to store vigor than those presently available. However, adjacent successful this utmost scenario, the modulation towards this new, much sustainable satellite indispensable ever minimize the interaction connected the astir disadvantaged radical successful society, who successful this lawsuit are precisely the ones slightest capable to support themselves from the adverse effects of ostentation and the emergence successful electricity prices," concluded Uribe. 

---

---

Provided by Universitat Oberta de Catalunya (UOC)