Spagna : March 15, 2010
During the past few months, the spot electricity market in Spain has sold electricity for “free” for more than 200 hours. This extraordinary event had never happened since the opening of the spot electricity market back in April 1998. However, on December 28, 2009, at 3:00 am, the settled price for electricity was zero Euros per kWh. Since that occurrence, the zero cents per kWh happened for a period of a few hours for more than 30 days with the free electricity being offered for 10 or more hours during some days.
This unprecedented event is caused by a number of factors. The market works in such a way that co-generation, renewable, nuclear and regular hydroelectric sources do not set the price for electricity. In theory, these generation sources are always operating and once demand starts to outpace renewable supply, other sources generated from coal, gas, oil or imports are brought into play. It is also important to note that renewable generation sources receive a state subsidy on top of a market price. Until December 2009, the energy sector always required that either gas or coal-fired plants operate in order to meet demand. However, with a shift to 24/7 renewable plants, the gas/coal plants will often sit idle as there is an increasing amount of renewable generation and given the state of the economy, demand for electricity is down.
Since renewable generators need to sell their product, the pricing of electricity at zero cents provides for the sale with the supplier making money through state subsidies. While not an everyday occurrence, zero pricing can, and will, happen at times given the current structure of the Spanish electricity market. Adding to overcapacity in the renewable sector has been the weather. While normally sunny and dry, this winter Spain has been treated to very rainy and windy conditions. As a result, hydroelectric power plants have been working at full capacity and wind farms are producing record amounts of electricity. For the first time ever, the Spanish grid has encountered problems in distributing electricity from wind farms and as a result, some wind farms were taken off line in order to deal with the problem.
The Spanish Government has already taken some measures in order to slow down the construction of new installation of renewable energy sources. This move, along with the coming of Spring and some improvement in industrial activity, may help to bring back a little bit of sense to the Spanish electricity market.