Spain begins its Iberexit back to energy autarky

We are witnessing the paradox that the most radical left-wing government, as the Spanish right defines Sánchez's government, is on the way to repeating the same economic formulas of Francisco Franco: autarky. Spain is looking to Europe for exceptionality, for self-sufficiency outside the rules that the EU's partners have set for themselves. Central and Northern Europeans view the Iberian peninsula's decision to opt out of the common energy regulations with some suspicion. They see it as an advantageous way of taking what is most convenient for them from the common bodies and seeking exceptionality when it does not suit them. This is what has begun to be defined as the 'Iberexit'.

The parameters within which the new decree approved by the Council of Ministers on Tuesday makes the electricity companies the 'paganinis' of the party, while the gas companies, those who are truly responsible for the imbalance in the internal markets and competitiveness, get off scot-free.

The two years of crisis caused by the pandemic resulted in the acceleration of the economy since last summer, which caused demand to skyrocket and, coincidentally, energy prices to soar. But which ones? Specifically those of the gas and oil companies. It is enough to take a look at their profit and loss accounts to see that they closed last year with record figures.

This fossil fuel price soufflé has been passed on to society as a whole and, obviously, to the markets and dependent industry. Electricity companies, for example, which need gas to supplement their generation, have seen their 'product' become more expensive. And it is precisely the widespread demand for electricity due to its integration into households that gas and oil companies have taken advantage of to point the finger at clean energy producers.

Specifically, they have managed to implant the discourse that electricity companies have lined their pockets with so-called 'profits dropped from the sky'. Basically, this means that they charge by the hour at the highest price used in generation. This is based on the fact that each production system (renewables, combined cycle and nuclear) is sold at a different value. But it is worth going down to the ground to get the figures straight.

The data are very clear. The business appears when comparing the cost of gas arriving from outside our borders with how it was offered on the daily Mibgas market. Because, of course, that is the reference price for combined cycle power plants that produce electricity. Last September, the figure was 25 euros/MWh on average, but it was bid at 65, 160% higher, according to data from the Association of Electricity Companies (Aelec).

Therefore, if gas companies lower their profit margins, the impact on citizens' energy bills is immediate and there would be no need to intervene in the market. 

The government has opted to intervene, which is why European countries have labelled Spain and Portugal an 'Iberexit'.

The Spanish government's stance against the electricity companies is striking when, moreover, 80% of the energy it produces is already locked in, in long-term fixed contracts. In fact, they are indexed to Brent oil and the US Henry Hub index at between 35 and 40 euros/MWh. On the other hand, gas companies offer on the Mibgas market at no less than 100 euros/MWh, which means that combined cycle plants then make electricity more expensive. And it is these plants that set the price on the marginal market.

Therefore, the accounts are clear, which is why the government's insistence on penalising electricity, even at the cost of breaking the EU's common rules, is incomprehensible.