The European Commission has approved, under EU State aid rules, a €8.4bn Spanish and Portuguese measure (€6.3bn in Spain and €2.1bn in Portugal) aimed at lowering the wholesale electricity prices in the Iberian market (MIBEL) by reducing the input costs of thermal power plants, considering that the two economies were experiencing a serious disturbance.
In May 2022, Spain and Portugal created an extraordinary and temporary mechanism in Spain and Portugal to protect consumers from the rise in electricity prices, by setting a price cap for natural gas used to generate electricity in gas-fired, dual-fuel-fired and cogeneration power plants until the end of May 2023. The cap will be set at €40/MWh for the first six months, before rising by €5/month to €70/month at the end of the year (average price gas of €48.80/MWh for the whole length of the intervention). The scheme is expected to help decouple gas prices and electricity prices and to help consumers exposed to the evolutions of the wholesale electricity market. Around 40% of domestic consumers in Spain, and between 70 and 80% of industrial consumption, are tied to the wholesale market price.
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