Iberian mechanism generates benefit of €570M

The Iberian mechanism generated a benefit of €570 million since it came into force until the end of January, allowing a reduction in the market price of 43.78 euros per megawatt-hour (MWh), Portugal’s environment minister said on Wednesday.

Duarte Cordeiro was speaking at a regular hearing in parliament when he announced that the benefit of the Iberian mechanism, which sets a price limit on natural gas for electricity production, “was €570 million until 31 January 2023, allowing a reduction in the market price of €43.78 per MWh.

The minister pointed to the results of the government’s intervention in the energy market, noting that according to the quick estimate from Statistics Portugal (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, that is, energy prices are pulling inflation down.

At issue is the temporary Iberian mechanism 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 per Megawatt-hour.

Portugal and Spain requested this instrument from Brussels last March due to the energy crisis and the Ukraine war, which put further pressure on the energy market.

At the end of February, Duarte Cordeiro was confident about the extension of the exceptional and temporary Iberian mechanism to contain electricity prices.

Although he did not wish to go into detail, Cordeiro told journalists that he had “positive prospects regarding the acceptance” by the European Commission of the “extension, at least while the so-called state aid for the various countries is in operation”.