This measure was to end on December 31, but the Minister of Finance and Public Administration, María Jesús Montero, has announced in Congress that it will be maintained until April 2022 to contain the rise in the price of electricity.
Another of the tax reductions that had been recently cfo email list approved, the suspension of the electricity generation tax (which is 7%) will also be maintained until the sector returns to normal.
Why has the price of electricity increased and how does it affect the price of gas?
The trend of recent months is expected to continue until early 2022 , but other factors will have to be taken into account.
The main causes of this increase are attributed to the rise in international gas prices and CO2 emission rights . Yes, although it may not seem like it, gas has a great influence on the price of electricity.
Why? Because it is the energy used to produce electricity in combined cycle power plants. So, the more expensive this energy is, the more the price of electricity rises.
Added to this is the greater demand for electricity . If in summer it was due to the use of air conditioners, due to high temperatures that exceeded 40 degrees Celsius in some places, in winter demand also increases but due to the cold .
So, with high gas consumption, reserves decrease. The consequence? The price of gas rises and again, it influences the price of electricity. As you can see, the connection between the two is very direct.
Did you know that in Spain, reservations have dropped by 15% since November 1? Much more than in 2020, when for the same period they had only decreased by 8%.
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How does the wholesale electricity market work?
The wholesale electricity market sets prices in a marginalist way: each power station offers electricity at a certain price according to its generation costs and the offers are ordered from cheapest to most expensive until the demand of consumers is met. The last offer to enter is the one that sets the price of electricity. This process is repeated for each hour of the day.
When demand rises significantly, the most expensive generation technologies end up entering. For this reason, the price of energy in the wholesale market has increased by 124% since the beginning of the year.
This has led to the price increase in the bills of consumers in Spain and Portugal, although all European electricity markets are noticing the price increase.
