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Energy prospects for a summer in Spain
If we make a reflection, for this summer, the electricity generated in July is cheaper by 3.1% but it is 20% more expensive than a year ago. In fact, fossil fuels and the higher wind energy production explain the drop in the electricity POOL (POOL is the name in the energy sector when referring to the wholesale electricity market) in the face of the increase in demand and the hydro-nuclear shortage. This conclusion can be drawn from the report made by the ASE Group on the Monthly Report of the Spanish Electricity Market.
Although we will explain everything that is happening in the Spanish electricity market, first we would like to add a electricity market comparison to see how we are in a global vision:
After four months of increases, the price of electricity in the electricity POOL fell by 3.1% in July compared to the previous month, with a closing price of € 48.63 / MWh. The data is 2.6% lower than the average of the last 5 years, but 20% more expensive than a year ago (then it was trading at € 40.53 / MWh). And, in addition, it is well below the futures price (OMIP), whose forecast a month ago was € 52 / MWh for July.
If we look at the computation of the last 12 months (moving year), the average price of electricity amounts to € 50.88 / MWh. It is therefore a higher figure than that registered in the last month, a fact that had not occurred since July 2016, exactly one year ago.
Coal, gas and wind lower the electricity bill
Electricity demand grew by 0.9% due to high temperatures and, as has been the case so far this year, the thermal gap left by the scarce hydraulic supply (See also why we should use marine energy) and nuclear, with decreases of 45% and 15% respectively compared to last year, it is being taken advantage of by coal and gas. Especially significant has been the increase in the supply of combined gas cycles, with a growth of 58% compared to last year and + 18% compared to June.
The reduction in the price of the POOL can be explained by various factors: the supply of fossil fuels (gas and coal) accounted for 36.4% of the total generation mix in July, with very competitive marginal prices, below the € 50 / MWh. Let's not forget that the increase in supply has a positive effect on these technologies, since they can reduce the impact of their fixed costs and start to compete with other sources of generation, even in off-peak hours.
To this is added that the Ascó and Trillo plants are already operating at full load, with which nuclear production increased by 8.3% compared to last month, reducing the contribution of coal in the valley hours by 5.5% . The increase in wind energy by 5.5% and that of imports by 12.7% have also been important factors to contain the price of the POOL in the month of July.
Regarding the rest of the costs that make up the final price, with the provisional data from REE, in July there was a rebound of € 1 / MWh in the total value, mainly due to the increase in the price of the restrictions (+ € 0.50 / MWh) and OS processes (+ € 0.27 / MWh).
Futures market without variations
The futures market has barely registered any fluctuations compared to last month. The year 2022 (yr-18) closed at € 45 / MWh (+ 0.7%) and the fourth quarter of 2022 (Q4-17) closed at € 49.00 / MWh (-0.8%).
Regarding raw materials, Brent registered a strong rise of 9.9%, which placed the price of a barrel above 52.5 dollars, while coal and gas closed with slight increases.
For the month of August it is a POOL very similar to that of July, even with even higher temperatures and with fairly stable commodity markets.
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