Spain caps gas price at 40 euros

The Spanish government has decided on a temporary price cap of 40 euros/MWh for gas used for power generation. It will apply for one year. Portugal is planning a similar measure to Spain. The EU competition authority has not yet approved anything. A government spokeswoman said in Madrid that Spain is leading a structural change in European energy policy with this decision. The EU energy regulatory agency Acer, on the other hand, warns against such market intervention.

At their last summit in March, the heads of state and government had conceded to Spain and Portugal that they would temporarily not have to apply the current electricity market design.

The two countries are effectively excluded from the electricity interconnection due to insufficient capacity of the French-Spanish electricity links, and thus cannot trade their predominantly renewable electricity across borders, but because they are part of the internal electricity market, they must adopt the wholesale prices achieved on it. There, the price is determined by the last renewable energy source in demand, which is currently natural gas. A price cap for gas in Spain and Portugal will therefore reduce electricity prices there.

The EU Commission will examine the "Iberian exception" to see whether it impairs the functioning of the internal electricity market. However, two weeks ago it indicated that Spain and Portugal may temporarily limit the price of gas to 40 euros per MWh.