An approach based on the Iberian price cap model for gas would have allowed EU member states to significantly reduce electricity prices, to be exact up to 35% less with a maximum price set at around 100 euros / MWh. This is the result of the research carried out by study center of the technology company Wärtsiläwhich takes into account the period between June 14 and September 13.
The gas price cap has been a key topic in discussions between EU ministers in recent weeks. Limiting the price for the entire market would be quite complicated and, if implemented, could pose a threat to the arrival of LNG in Europe. While it is true that on the one hand the high price and the lower availability of gas have put the electricity market in crisis, on the other hand there have been no interruptions in the electricity markets in Europe, with the exception of major maintenance works in the French nuclear power plants. This scenario shows how the price formation of the electricity market must be temporarily decoupled from the price of gas.
The most effective way to achieve this? Establish a temporary ceiling on gas prices used for the production of electricity. A great help could come from the Iberian model, already implemented by Spain and Portugal on June 14 and with clearly positive results. The market price of electricity was clearly lower in Spain and Portugal than in the rest of Europe.
Price ceiling, this is how much the Italians would have saved in just 3 months
According to what was calculated by Wärtsilä study center, lItaly would have seen a reduction of up to 20% in electricity market prices if a ceiling of 100 € / MWh had been applied to the gas used in the production of electricity. This is slightly lower than the EU average (24%), but the savings would have been considerable over 3 months: a net saving of around 7.3 billion euros, equal to 120 euros per capita. The net savings take into account both the savings resulting from the reduction in the day-ahead market prices and the cost of the gas support price. The highest electricity prices in the EU are in France, where the drop in prices (according to our modeling) would have been greater: from 419 € / MWh to 287 € / MWh. In Germany, on the other hand, the model produces a significant reduction in the price of electricity, from 369 € / MWh to 269 € / MW.
“The research shows how Italy, among other EU countries, would benefit significantly from the implementation of the Iberian model with a ceiling of 100 € / MWh set for the gas used in the production of electricity. The current energy emergency has indicated that at the system level, in the long term, it is necessary to abandon the production of gas electricity at the base load and build the system on renewable energy and flexibility “, ha spiegato Anette Danielsson, Senior Analyst di Wärtsilä Energy – This would make Italy much less vulnerable to fossil fuel price shocks and would allow it to further reduce electricity prices and improve energy independence “. “Electricity prices for consumers and industries in Italy have been difficult to manage, mainly due to the price and availability of natural gas. If implemented across the EU, the Iberian model could be a good temporary solution to help Italy cope with the energy emergency and reduce electricity prices ” explained Marco Golinelli, Senior Business Development Manager of Wärtsilä Energy.