February will close with the lowest electricity price recorded in the last three years, with an average that will be less than 42 euros per megawatt/hour. As a consequence, electricity will be taxed this March with a VAT of 21% compared to the current 10% set by the Government of Pedro Sánchez on an exceptional basis. In fact, the Executive has already confirmed today that it is not going to stop the return to standard VAT due precisely to this reduction in the average price in recent months, also remembering that the price of electricity in Spain is the cheapest in the Union European.
In this regard, the Minister of Economy, Commerce and Business, Carlos Body, has stressed that the Iberian Peninsula has a distinctive element compared to the rest of the EU thanks to the “evolution of climatic conditions and the high penetration of renewables” that, In his opinion, it is already having “clear effects.” Body has made it clear that the measures that were designed at the time “with a condition associated with the evolution of prices, that is, the urgency of the inflation shock in energy matters”, must “continue their course.”
At the time, the Government, due to the increase in prices generated after the start of the Russian invasion of Ukraine, extended the tax reduction on the receipt. The regulations established that the VAT on electricity would go from 5%, compared to the 10% at which it was, throughout the year 2024. Now, a caveat was added: this reduction would not be applied when the average price of the daily market of the last month prior to the last day of the billing period was less than 45 euros per MWh.
And that is exactly what has happened. The sharp drop in the price thanks to the weather conditions will mean that February will almost certainly end with the average price of electricity below precisely that figure of 45 euros per MWh, so that, as expected, the 21% VAT.
The decrease in price in the wholesale market is explained above all by intense sun and wind weather.
Specifically, the effects of Storm Louis have been key, thanks also to the generation of wind energy and a significant presence of solar energy. This accumulation of factors has led to a chain of three days below the bar of 4 euros/MWh and to adding a large number of hours to zero euros/MWh – this price is not then transferred to the receipt exactly at that price, since there are some fixed costs for the electricity consumer, due to tolls, charges and system adjustments.
That is why starting tomorrow, the penultimate day of the month, the average price of electricity will rise to 9.35 euros per MWh in the wholesale or pool market. However, the minimum prices of the last week will continue to have a price of zero euros in some time sections.
Therefore, this month the average price of electricity in the pool will end up very close to 41.245 euros per MWh, compared to 132.7 a year ago, or 74 last January. That is why this is the cheapest month recorded since February 2021, which has an average price of 28.5 euros. And starting in March 2022, coinciding with the start of the war between Russia and Ukraine, the price began to rise in price until reaching its all-time high.
Thus, starting tomorrow, the price of electricity will rise by 155% compared to the 3.66 euros/MWh it costs this Tuesday. However, according to the Iberian Electricity Market Operator (OMIE), these data are not that far from the annual minimum levels, with their lowest point last Sunday, with 3.06 euros/MWh.
By time slots, the highest price of electricity will be recorded tomorrow between 8:00 p.m. and 9:00 p.m., with 66.96 euros/MWh. On the other hand, the lowest price will be 0 euros/MWh between 11:00 and 17:00. Now, electricity will be almost 93% cheaper than a year ago.
This VAT increase applies to all types of electricity contracts, although it is expected that the most affected will be consumers with contracts on the free market. Generally, these are those with fixed rates, since those who have a regulated rate, such as those with lower incomes and large families, will see this increase cushioned by the low prices.
