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The Spanish electricity sector in the face of rising gas prices and the Goverment measures rolled out in response

Author

Listed:
  • Fernando García Martínez

    (Banco de España)

  • Matías Pacce

    (Banco de España)

Abstract

The increase in electricity prices, which peaked in August 2022, has affected the various activities carried out in the Spanish electricity sector differently. This paper analyses the impact of this increase on the sector, distinguishing between electric power companies and electricity retailers, paying special attention to their operating profit and, particularly, to the influence of aspects such as (i) the incidence of forward contracts with a fixed price, (ii) asymmetric exposure to price increases in wholesale electricity markets, or (iii) belonging to vertically integrated groups, in the case of electricity retailers. The effect on the sector of the measures rolled out by the authorities to mitigate the impact of higher electricity costs on households and companies in Spain is also analysed. Of note among these measures are the Iberian Exception (a mechanism to cap the cost of the gas used in electricity generation) and the temporary deduction of the so-called excess remuneration arising from higher gas prices. Lastly, this paper studies the impact of the extraordinary temporary levy that energy companies must pay on net turnover for 2022 and 2023.

Suggested Citation

  • Fernando García Martínez & Matías Pacce, 2023. "The Spanish electricity sector in the face of rising gas prices and the Goverment measures rolled out in response," Occasional Papers 2316, Banco de España.
    • Handle: RePEc:bde:opaper:2316e
    DOI: https://doi.org/10.53479/34832
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    More about this item

    Keywords

    energy; electricity markets; electricity prices; generation costs;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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