Energy market expert warns about high price of electricity in Spain this summer

Spanish energy market analyst and CEO of Tempos Energía, Antonio Aceituno, has warned that electricity prices between July and September this year might experience a surprising rise, potentially reaching 100 euros per megawatt hour. Aceituno cites rising temperatures and the level of European gas reserves as the culprits.

According to the expert, "one of the reasons behind this prediction lies in the behaviour of the TTF indicator - the gas benchmark in Europe - which has consolidated above 36 euros per megawatt hour". "The upside risk would also come from the fact that Europe will have to double its gas reserves in a few months due to the uncertainty in the market," he said.

In this context, the reactivation of liquefied natural gas demand from China during the summer months and the development of the energy relationship between the US and Europe (if US supply is constrained), become the two main sources of volatility that, along with hydroelectric energy, shape the electricity outlook for the summer months.

The data frequently shows unmanageable solar or hydro episodes, forced to produce or turbine at zero cost. Tempos Energía has pointed out that "hydropower has become the second largest source of the electricity mix, ahead of gas and nuclear, covering 19.72%, with reservoirs reaching 90.50%".

According to the energy consultant's forecasts, electricity's future shows a change in trend with the TTF, "the key indicator", up 13.70% in the month of May to 36.46 euros. This upward curve in gas prices is explained by the stagnation in peace talks in Ukraine.

As a result, "Europe needs a sustainable alternative to Russian gas". "The European Commission is going to propose legal measures in June to ban Russian gas imports from 2027 onwards," said Tempos Energía's CEO.

For Aceituno, from this point onwards, "a zero import quota will possibly be implemented, which will affect liquefied natural gas as well as gas pipelines". In addition, the filling of European gas storage facilities continues to be a priority for the coming winter. Although stocks have risen to 45.70 %, they are down from 68% a year ago.

In relation to this situation, Aceituno stated that "the nearest-term electricity contracts reflect the upward pressure on gas prices in May due to lower renewable output, uncertainty over liquefied natural gas supply and a potential decline in nuclear energy production".

The current state of the electricity market is preceded by a May that "has made history" in the electricity market, with an average price of 14.48 euros per megawatt hour, which has turned out to be the second cheapest in recorded history.

For more than 60% of the month, the pool has operated with prices below 20 euros, registering negative prices one out of every three hours. In May, the electricity system was unable to absorb all the energy from renewables due to weak demand. During the first fortnight, consumption was 564.51 gigawatt hours per day (the lowest figure of the year), rising slightly to 578.93 in the second fortnight.

Dominated by solar and hydro, supply has caused a structural imbalance, with generation more than 50-70 gigawatt hours per day higher than daily demand. Solar energy, with 22.29% in the first fortnight and 23.22% in the second, has collapsed prices. Combined cycle plants increased their share to 13%, but in a context of falling prices.

The Brent crude oil market for next month could fluctuate between 60 and 70 dollars per barrel, with a clearly bearish trend if an increase in supply by OPEC+ is confirmed and global trade uncertainty persists.

According to the CEO of Tempos Energía, "OPEC is looking to regain market share against US shale and will almost certainly go for a clear acceleration from initial plans with an increase of 411,000 barrels per day by July".

Although the climate in the markets has improved slightly, after the moderation of trade tensions between the US and China, "uncertainty in relation to international trade will continue to exert pressure on the global economy and, as a consequence, on the demand for crude oil", the expert explained.

After trading in a range of 70 to 80 dollars a barrel last year to a maximum of 83.48 dollars, experiencing its highest minimum in four years at 64.86 dollars, "macroeconomic uncertainty is the predominant index in the crude oil market". In this context, "inflation, the US recession, tariffs, production in the face of US storage demand will be decisive in understanding changes", Aceituno pointed out.