Price increase due to summer heat
The month of July will culminate in a series of significant increases in the cost of electricity. The high demand, caused by the high temperatures of the first full month of summer, has exerted strong pressure on the wholesale electricity market, reaching maximum annual figures with days close to 100 euros. This weekend was perceived as a possible turning point, with two consecutive days in which the Iberian Energy Market Operator reported a notable decrease, reaching 30 euros per MW/h.
Expectations for next week
However, that perception turned out to be wrong. The first projections for next Monday suggest a new considerable increase in costs. According to the OMIE, the price of a megawatt-hour will increase by 161% in a matter of hours, reaching a daily average of 79.53 euros and registering a peak that will exceed 133 euros between 9 and 10 p.m.
Recovery of high costs
The week begins by recovering the high costs that have marked July. Both last Thursday and Friday, the Operator’s average reference exceeded 100 euros for the first time since the beginning of the year. The first extreme heat waves in the state break with the consistency of 2024, a year that had central weeks of spring with numerous days of negative prices. In April, intense production of renewable energies dominated electricity generation in Spain, completely moving away from current levels with a monthly average of 13 euros.
Impact of photovoltaic generation
It is important to mention that, according to Grupo ASNO, a consulting firm specialized in energy, the increases in July could have been even greater. Photovoltaic generation has covered up to 50% of the State’s total demand during the central hours of the day, and in some moments it has managed to reduce costs compared to the June highs.
Slowdown of wind production
However, weather forecasts, which anticipate a predominantly summer climate with high temperatures and lack of wind, could slow down wind generation. This phenomenon, combined with the increase in demand during episodes of extreme heat, puts a new price increase at risk.
New calculation methods
It should be remembered that the new calculation methods that have come into force this year mean that the price in the wholesale market does not directly translate into costs for end users. This is especially relevant in the area of regulated rates. Known as PVPC, it incorporates a combination of medium and long-term prices to cushion the effects of market fluctuations on consumers, and even more so on the most vulnerable.