European Commission approves Iberian proposal to limit natural gas prices

The governments of Portugal and Spain have reached an agreement with the European Commission on a joint proposal to limit natural gas prices in the wholesale market, which will set the average price of gas at €50 per MWh for one year. The information was made public by officials from both countries at a press conference, where Portugal was represented by Environment Minister Duarte Cordeiro.

“Portugal and Spain today [Tuesday] had a political agreement with the European Commission after very intense weeks of work and which required very difficult technical work, but which allowed very significant advances and a very satisfactory result for what was our objective,” the Minister announced.

This step will allow “to materialize the agreement reached at the European Council” of March 25. It translates, therefore, “into setting a mechanism” that will allow the two countries to decouple the gas from the electricity market, the Portuguese Minister explained.

The mechanism, negotiated by Lisbon and Madrid with the European Commission, will last “around 12 months,” said Duarte Cordeiro, and it will be possible to “set an average price of around €50 per MWh [megawatt-hour],” a value above the €30 per MWh proposed by the two governments.

In an initial phase, the price will be set “at around €40,” the minister said, while the Spanish government vice president responsible for Ecological Transition, Teresa Ribera, noted that the MWh of natural gas is currently priced at around €90.

Electricity prices in the Iberian market are influenced by natural gas prices in combined cycle power plants, which use this fuel for electricity generation. However, Portugal no longer produces electricity from coal and renewable energy – especially wind, solar and hydro – is intermittent, so these plants help to cover needs. In addition to the price of gas, electricity is also influenced by the price of CO2 licenses.