Electricity and ideology

BarcelonaOn January 7, the price of MWh in the Iberian market (MIBEL) was 110 euros, a figure then considered incredible. The fright lasted ten days, and at the end of the month the price fell to an equally incredible 0.99 euros. That was a warning of the instability of a crucial market. From March the price has risen again, now unstoppably, to reach 130 euros today.

It is relatively easy to explain these fluctuations. The price of electricity is linked to the cost of burning gas and oil, which have very volatile prices. Let us remember that in April 2020 the oil price was negative (!) Because we had been confined, we had stopped consuming it and no one knew where to store what was still being extracted. Now, the economic recovery, the fear of falling back into that situation and Hurricane Ida (which has paralyzed extraction in the Gulf of Mexico) have made the price of oil almost double what it was a year ago. Now, let’s not take the radish by the leaves, because on whom the price of electricity really depends is on regulation. In particular, there are two elements at stake.

First, we have decided to decarbonize ourselves to save the planet, and one of the ways we have decided to do this is by raising the cost of burning fossil fuels by demanding the purchase of CO2 emission rights, the amount of which we have limited. The post-pandemic economic recovery is proving too vigorous for the pace at which we are increasing renewable electricity generation, and the prices of those rights have more than doubled in the last year. Among other things, electricity is expensive because we are in a hurry to decarbonize.

Secondly, and with regard to Spanish prices, regulation (essentially the Piqué law of 1997) is based on the absurd principle that electricity companies can do it on their own. A sentence from that law makes it clear: “It is not considered necessary for the State to reserve the exercise of any of the activities that make up the electricity supply. Thus, the notion of public service is abandoned ”. Among other things, electricity is expensive because we have believed in the fantasies of neoliberalism.


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