One of the rare good news that 2020 brought was the lower electricity bill. That year, the average bill paid by Spanish consumers under the regulated tariff (PVPC) was 10% cheaper than the previous year, thanks to the low prices of the daily electricity market. The decrease in demand, the greater prominence of renewables or the low price of gas led to the cheaper pool, which serves as a reference to set the price of part of the invoice.
A ‘typical’ family, understood as one with two children, a contracted power of 4.4 kW and 3,900 kWh of annual consumption, had a electricity cost of 714 euros: 79 less than in 2019, and 145 euros compared to 2018 (-16.8%). A reduction that consumers under the PVPC have benefited from, which only involve about 37% of the total. Free market customers (the remaining 63%) will have paid the price agreed with the trading company on duty in their annual contract.
The reason why the electricity bill was reduced is in the average price of the pool, which marked a annual average record of 33.97 euros per megawatt-hour (MWh), 28.8% lower than in 2019 (€ 47.68 / MWh). It is also about lowest price since 2004When the Iberian electricity market (the Mibel) did not yet exist, the annual price of electricity stood at € 28.9 / MWh.
Less demand and more renewable
The 5.1% drop in annual demand – due to the impact of the pandemic – is behind these low prices. But it is far from the only explanation. According to analysts ASE Group, other reasons are the growth of renewable generation (13.1% higher than in 2029), low gas prices for much of the year, and “an increasingly energy efficient society.”
According to data from Electric Network, the nuclear it was the technology that contributed the most to electricity generation last year (22.2% of the total). It was closely followed by wind (21.8%), which reached very high figures in the month of December, but which at the end of the year only increased its production by 1%. The increase in renewable generation is explained by the greater role of the hydraulics. Despite representing only 12.2% of the national electricity production, increased no less than 24%. However, the technology that grew the most in 2020 was Solar photovoltaic. It was responsible for 6.1% of the electricity generated, but represents an increase of 68% compared to the previous year.
The production of combined cycles was down 25% compared to its big year, 2019, and stayed at 17.5% of the electricity generated. And that these plants, which run on natural gas, absorbed the production previously provided by Coal, which continued its particular sinking: only generated 2%. In this way, the contribution of fossil fuels to the electricity mix fell by 25% throughout the year.
And what will happen in 2021? According to the experts of the ASE Group, the Spanish and European futures markets experienced an “extremely volatile month of December with strong rises” caused by different circumstances. The main one, the commitment of the EU to raise to 55% the reduction of CO2 emissions by 2030. And also the post-Brexit trade agreement reached with the United Kingdom, which has triggered the price of the European emissions market.
This suggests that European coal and gas plants will pass these higher costs on to the price of electricity. For all this, they calculate that the futures market price for this year rises 11% in Spain, up to € 50.84 MWh, “in line with the rest of the European markets”.