With the extension of the facility, Portugal and Spain are safeguarded until "the end of the year" if there is a rise in the price of gas because of demand next winter.
The European Commission has approved the extension of the Iberian facility, which has been in place since June last year, to limit the price of gas in electricity production, Portugal’s environment minister announced on Tuesday.
“Today the European Commission agreed to the extension of the Iberian gas price cap for Portugal and Spain […], it will grow by one euro per month until the end of the year,” Duarte Cordeiro said as he entered a meeting for the Transport, Telecommunications and Energy Council in Brussels (Belgium).
With the extension of the facility, Portugal and Spain are safeguarded until “the end of the year” if there is a rise in the price of gas because of demand next winter.
The mechanism in place in Portugal and Spain, the minister added, “works as an insurance for high gas prices,” as last year the “main problem” in the electricity market was that there were “very high gas prices” and it was this price that outlined the price of electricity.
“It was a benefit for everyone who was exposed to the market,” he added.
The Iberian facility generated a benefit of €570 million from its entry into force until the end of January, allowing a reduction in the market price of €43.78 per megawatt-hour (MWh).
At the beginning of March, the environment minister recalled that, according to a quick estimate from the Portuguese National Statistics Institute (INE) for February, “inflation in energy products was 1.96%, with the evolution of these prices being one of the catalysts for the reduction in inflation that has been seen for the fourth consecutive month, i.e. energy prices are pulling inflation down.”
At issue is the temporary Iberian gas price cap in force since mid-June last year to place limits on the average price of gas in electricity production, which in the case of Portugal and Spain is around 60 euros per Megawatt-hour.
This instrument was requested from Brussels by Portugal and Spain last March due to the energy crisis and the war in Ukraine, which put further pressure on the energy market.