Iberian electricity price reduction mechanism extended until the end of the year

The European Commission has approved an extension of the Iberian mechanism, in place since last June, to cap the price of gas in electricity generation, the environment minister said on Tuesday.

“Today the European Commission agreed to the extension of the Iberian Mechanism to Portugal and Spain. […]will grow by one euro per month until the end of the year,” said Duarte Cordeiro before entering a meeting of the Council for Transport, Telecommunications and Energy in Brussels (Belgium).

With the extension of the mechanism, Portugal and Spain are protected until “end of the year” if there is an increase in the price of gas due to demand with deliveries for next winter.

The mechanism in place in Portugal and Spain, the minister added, “acts as an insurance against high gas prices” as last year the “main problem” in the electricity market was that there were “very high gas prices”. was this price that delineated the price of electricity.

“It was an advantage for everyone involved in the market,” he added.

The Iberian Mechanism generated a profit of €570 million from its entry into force until the end of January, reducing the market price by €43.78 per megawatt hour (MWh).

In early March, the Minister of the Environment recalled that, according to the National Institute of Statistics (INE) rapid assessment for February, “energy inflation was 1.96%, while the dynamics of these prices is one of the catalysts for lowering inflation, which is confirmed for the fourth month in a row. that is, energy prices pull inflation down.”

This is a temporary Iberian mechanism that has been in place since mid-June to limit the average price of gas in the production of electricity, which in the case of Portugal and Spain is about 60 euros per megawatt-hour.

This tool was requested from Brussels by Portugal and Spain in March last year in connection with the energy crisis and the war in Ukraine, which put even more pressure on the energy market.