Perfect energy storm. In addition to electricity, which will set a record price in Spain this Wednesday, 291 €/MWhGas has also closed at a record price, marking 130.5 euros per megawatt hour (MWh) this Tuesday. It is the most expensive price in history, motivated among other things by the Russian threat to invade Ukraine, whose consequences for Spain are terrible in the midst of a consumption increase this winter, the lack of the Maghreb gas pipeline, and the rise in gas consumption to generate electricity, which will make the light continue its bullish climb.
The price of gas threatens the recovery of Spain and adds more uncertainty about the options of a lack of this type of energy in winter. Reserves in Spain are lower than just a year ago to face the harsh winter, and Enagás’ forecasts for the consumption of this energy for the winter have increased by 15% for the month of January.
Less reserves and more consumption that are added to the lack of the Maghreb gas pipeline, closed by the Algerian government on December 31, which supplied Spain with 20% of annual consumption. This lack of supply must be replaced by Liquefied Natural Gas (LNG), which arrives in ships, but whose price is higher and, in addition, the competition to buy them worldwide is very great due to Asian demand.
The vicious energy cycle is completed with the need for gas to generate electricity in Spain, which has opted to accelerate the closure of coal and nuclear plants. The weight of gas in the energy mix stood at 35% this Monday, exceeding the figure for November.
More expensive
The consequence of this need to buy gas to generate electricity implies the rise in the price of electricity in the wholesale market, since it is the most expensive energy and it is the one that sets the final price on many occasions -the last energy that enters to balance supply and demand is what sets the final price.
The cost of this energy storm for citizens is obvious. Gas will be more expensive in winter and electricity, too. That it will raise inflation and retract consumption, which will have an immediate effect on national economic activity. The Government insists that Spain will lead European growth in 2022, but the truth is that numerous national and international entities have lowered their forecasts for this year and next.
