Why are Spain and Portugal temporarily out of the European electricity system?

Brussels acknowledged the “Iberian exception” and approved Spain and Portugal to revive their electrical autonomy by temporarily exiting the European customs system. Why is that this exception doable and what are the penalties for firms and customers? Can or not it’s prolonged to different international locations in the Union the place the value per megawatt has reached stratospheric ranges? On Friday August 26, we handed the threshold of 1,000 euros per MWh in France!

Previously reserved for nationwide monopolies offering 100% technology and distribution, the European electricity market was opened to competitors in 1996. Initially reserved for producers, it was prolonged in 2007 to all individuals in the aggressive market that means all through the European Union, any public. Or non-public firms can freely promote MWh and any firm or particular person can freely select its provider. In different phrases, and inside technical limits, electrons that had been as soon as stopped at the border can now flow into freely in the European community. This is the free market Indeed A rule which may appear persuasive descending Arguable however which, in a free market, is however inevitable: Order of Merit or marginal supply guidelines.

its guidelines Order of Merit

The Order of Merit Establishes an order of precedence in implementation of numerous energy technology models (coal, gas oil, fuel, hydro, nuclear, renewable). Every half hour, they are referred to as in ascending order of their marginal value, from least costly to costliest. For every half hour, the value relies on the final manufacturing unit requested (ie the costliest). In truth if the finish supply worth can’t be assured then its producer won’t ever implement it. This was clearly not the case earlier than the opening of the European market: every nation had a pure monopoly (EDF in France) which operated all the sources alone and may then move the common value to the client. If there’s a scarcity at the final supply, it might probably make up its losses at the least costly supply. In the present system of a number of and competing suppliers, finish supply producers (fuel: on common 3 MW of fuel are wanted to supply one MW of electricity, fuel that exceeds 300 €/MWh for electricity near €1,000) are worthwhile solely at the margin. Others, on the different hand (renewables, hydropower and nuclear), reap tremendous income on the backs of customers. For the latter, his solely satisfaction is to not endure a black out. In a approach, he pays the next value for a sort of all-risk insurance coverage with out a low cost.

The Order of Merit It is a rule obligatory without cost competitors to exist in a European market. Indeed, even with a completely remoted nationwide electricity community, an inner free market can’t be excluded Order of Merit While guaranteeing a “zero black-out”. To be utterly free from it, two situations are obligatory: ​​on the one hand to have the nationwide energy to disconnect from the European community, on the different to return to nationwide monopoly with out competitors. One may additionally think about a European supra-national monopoly controlling electricity throughout the EU. However, given the main variations between member states (each in phrases of mixing and taxation), such a mannequin appears solely utopian.

France has grow to be a significant electricity importer

The answer chosen by Spain and Portugal covers one of the two situations listed above. Compared to its European counterparts, the Iberian Peninsula is an “electrical peninsula”: solely the 650 km French border can alternate electrons with the European Union. This restriction of alternate pressured the two Iberian international locations to develop extra nationwide energy methods. Compared to its neighbors, Spain enjoys good daylight situations (22% load fee, in comparison with 14% in France) and wind (25%). It has a really balanced electricity combine supported by 37% photo voltaic and 63% regulated by wind with 25.4% fuel and 20.8% nuclear. Importing nearly no Russian fuel, it has the largest regasification park in Europe (7 terminals in Spain and one in Portugal), which permits it to import far more liquefied pure fuel than its neighbors.

France has grow to be an importer of electricity after shutting down many of its nuclear reactors in current months, with commerce between the Iberian Peninsula and the European Union falling in current months. Suffering always Order of Merit Unable to learn from import ensures in case of want, Spain and Portugal have been allowed by Brussels to temporarily grow to be an “electrical island” by leaving the European customs system.

But this new standing, usually offered as a easy political will, didn’t defend Spain and Portugal from rule Order of Merit which is able to proceed to use inside a restricted scope of the two Iberian international locations. Independent of any commerce in the European grid, there may be certainly a free electricity market inside the Iberian Peninsula with a number of public and non-public gamers. To decrease electricity costs, Madrid and Lisbon haven’t any alternative however to subsidize fuel to cap the value of an electrical MWh. A high-cost operation: decreasing fuel costs by €100 (and due to this fact by €300 per MWh of electricity) would value, on an annual foundation, about €20 billion in Spain alone. Part of this operation must be financed by non-gas operators (particularly renewables) incomes tremendous income.

Ikea owns 4 wind farms in France and six parks in Germany making tremendous income

Having grow to be a heavy importer of electricity after the shutdown of its nuclear reactors in current months, France has little interest in leaving the European electricity system at this time: for a number of weeks, France has been importing 20% ​​of its electricity from its European neighbors. Such selections may have disastrous penalties in the coming months. Even in the medium time period, the European grid ensures a safe provide for France and its neighbors.

The speedy answer would finally be to implement the Hispano-Portuguese technique on a European scale: subsidize fuel to decrease the marginal value of fuel MWh and name for solidarity from non-gas electricity producers who at this time are making tremendous income on European territory. These non-gas producers are not as worthwhile as we imagine. Thus, the furnishings producer Eka, proprietor of 4 wind farms in France and six parks in Germany, is in the course of with out speaking about tremendous income. Where the French thought they had been saving on the value of their furnishings, they set the Swedes again a hundredfold by charging increased costs for his or her electricity.

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