Brussels Approves Gas Price Cap In The Iberian Peninsula: €40/MWh


The European Commission yesterday authorised as State aid the so-called Iberian derogation, which consists of setting a cap of 48.8 euros/MWh in Spain and Portugal on average for one year on gas offers in the wholesale electricity market.

According to a European Commission communiqué, the measure involves state aid of 8.4 billion euros (6.3 billion for Spain and 2.1 billion for Portugal) “aimed at reducing wholesale electricity prices in the Iberian market (Mibel) by reducing the input costs of fossil fuel-fired power plants”. The measure has been approved under the EU Treaty, “recognising that the Spanish and Portuguese economies are experiencing a serious disturbance”. The measure, according to Brussels, “will reduce electricity spot market prices for businesses and consumers” and “will not affect trading conditions to an extent contrary to the common interest”.

The mechanism will begin to be applied in the pool auctions of 14 June (a prior ministerial order is required) until 31 May 2023. It is a direct subsidy to electricity producers to finance part of their fuel costs, according to the communiqué. The daily payment will be calculated on the basis of the price difference between the market price of natural gas and a ceiling price of 48.8 euros/MWh on average for the duration of the measure. In the first six months of application of the measure, the actual price cap will be set at EUR 40/MWh.

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