Spain and Portugal will be allowed by the European Union to apply a limit to the gas price used in power generation for a 12 month period, with the gas price cap set at Eur50/MWh ($53.31/MWh), Spanish state broadcaster RTVE reported April 26. Portugal's Minister for Climate Duarte Cordeiro and Spanish Ecological Transition Minister Teresa Ribera announced the agreement following a meeting with the European Commission. The measure would be approved in Spain in the weekly cabinet meeting to come into force by May, Ribera said. The government would then officially confirm how the mechanism is to work including the formation of a cross border power price with France that could be impacted. The cap was higher than the Iberian countries' starting position of Eur30/MWh, but the delegation was prepared to offset that difference with the duration of the temporary measure, in the knowledge that Winter 2022-2023 would be covered, RTVE reported.
The measure is designed to "reduce exposure (of consumer power bills) to the volatility of gas market," Ribera said. The report, citing Cordeiro, said that an initial Eur40/MWh cap would be put in place, which would then increase to result in an average Eur50/MWh cap for the full year. Spanish gas for May at the PVB hub was assessed April 25 at Eur80.07/MWh, a discount of almost Eur13.00/MW to the benchmark TTF contract, S&P Global Commodity Insights data showed. Spanish day-ahead power averaged Eur228.41/MWh in Q1 2022 but forward contracts have started to ease since Spanish proposals for a gas-for-power price cap emerged at the EU summit late March. Spanish Q3 base power fell April 26 to Eur190.00/MWh during the afternoon on EEX after settling April 25 at Eur220/MWh. Spain has 2.5 GW of power export capacity to France. Traditionally it is a net importer of power but record low nuclear availability in France has seen net flows going in a northerly direction in recent weeks.