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11 ways to cut costs as Spain’s electricity rates beat all-time price records

War in Ukraine has pushed electricity prices in Spain to the highest rate on record - €544 per megawatt hour (MWh). Here are 11 ways to cut down on consumption and therefore your energy bills during this period of extreme market volatility.

11 ways to cut costs as Spain's electricity rates beat all-time price records
2021, people in Spain paid an average of €949 in electricity compared to €675 in 2020. Photo: DESIREE MARTIN/AFP

The price of electricity in Spain’s wholesale market has been set at €544.98 per megawatt hour for Tuesday March 8th 2022, a €100 rise in just 24 hours and an all-time record for Spain’s energy sector.

Between 7pm and 8pm on Tuesday, Spaniards will pay €700/MWh for electricity, truly outlandish rates.

A year ago, the average price per megawatt hour was just €45.44, although over the course of 2021 the price did first double and then quadruple that rate as the Covid-19 pandemic, inflation, adverse weather and a volatile natural gas market all formed the perfect storm for consumers.

And yet, those sky-high rates pale in comparison with what people in Spain now have to pay, with Russia’s invasion of Ukraine proving to be the straw that broke the camel’s back.

The same is now happening in Germany, France and Italy (although not quite to the same extent as in Spain), increasing pressure on Brussels to find ways for the EU’s natural gas and electricity markets to not be so closely aligned.

To be clear, the record €544.98 megawatt hour (MWh) rate does not mean that every person’s monthly electricity bill in Spain is going to be in the thousands of euros (for interest’s sake, the average Spanish household consumes 0.0099 megawatt hour).

But you are likely to pay more. Over the course of 2021, people in Spain paid an average of €949 in electricity compared to €675 in 2020.

So the forecast under the current climate of war and global energy crises will mean your monthly bill could easily rise by €20 or €30, perhaps higher.

To help you counteract this spike in electricity rates in Spain, here are 11 tips that can help you reduce consumption and thus costs during this period of extreme market volatility.

Familiarise yourself with Spain’s cheaper electricity times

It’s become more expensive to use electricity in the first part of the day from 10am – 2pm and in the evenings from 6pm – 10pm from Monday to Friday. 

The average times are between 8am – 10am, 2pm – 6pm and 10pm – midnight. 

The cheapest times will be in the early mornings on weekdays and all day on Saturday, Sunday, as well as national holidays.

Adapt your contracted power to your real needs

Those on an estimated energy tariff could switch their contract to one that only charges them for the electricity they actually use and need. Free power changes are allowed until May 31st, 2022. This must be requested through your energy provider.

Check the maximum power and usage data

Check on your energy provider’s website to find out your consumption data and adjust your contracted electricity accordingly. Spain’s National Markets and Competition Commission (CNMC) suggests that this could save you up to €16 per year by doing this alone.

Avoid too much usage all at once

Using more than one appliance or electrical device at the same time pushes up consumption. For example, if you use the oven, the kettle and the washing machine at the same time, you will pay a lot more on your bill than if you use them separately. The CNMC has also said that “the iron is one of the devices with the highest consumption. Avoiding turning on all devices at the same time can lead to savings of between €200 and €300 per year”.

Shift consumption to periods outside peak hours

If possible, change the times when you use the most electricity. For contracted power during the cheapest times, the price is actually 95 percent lower than in the highest period.

Avoid stand-by mode on devices

Keeping televisions, laptops and other electronics and appliances plugged in and in stand-by mode whilst not being used does add up in the long run. 

If you unplug or switch off the current to these devices this can result in reducing your electricity bill by up to 10 percent annually. 

Use LED bulbs and remember to switch the lights off

LED bulbs use up to 80 percent less electricity than regular bulbs. Even though they are more expensive, they last 12 times longer on average. 

The average annual saving on people’s electricity bills when replacing normal bulbs with LED ones was €14 per bulb in 2018, before Spain’s electricity rates skyrocketed.

And although it may seem obvious, remembering to switch off lights and prioritising natural light in sunny Spain is a no-brainer if you want to cut costs.

Wash your clothes at less hot temperatures

As a basic rule, washing machine programmes running at low temperatures consume less than those running at higher temperatures. For example, washing clothes at 40°C instead of 60°C saves up to 55 percent consumption.

Use your fridge efficiently

As with the washing machine and dishwasher, it is possible  to reduce electricity consumption  through the refrigerator if you adjust its temperature to around 5°C and the freezer temperature to -18°C .

 In the case of the freezer, it’s also important to defrost it regularly, since the accumulation of ice can increase consumption by up to 30 percent.

Reduce your spending on heating

First, keep in mind that electric heating can be up to five times more expensive than gas heating in Spain.

Remember also for each degree you put the heating up, consumption will increase by 7 percent, so try to put on a jumper instead of keeping your heating above 20 °C.

Don’t overdo it with the air conditioning

This may be a big ask for those who live in parts of Spain that get extremely hot during the summer months, but there are few ways to cut costs of this high-consumption device. 

Buy an air con machine with an inverter system rather than one without as they’re 40 percent more efficient, install it in a place that doesn’t receive direct sunlight, use blinds and sunshades to help to keep your home cool during the hot hours of the day, and when temperatures drop in the evening switch off your air conditioning and air your home instead.

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PROPERTY

What the Euribor rise means for property buyers and owners in Spain

The rise in the Euribor interest rate, used to calculate mortgage payments in Spain, is causing big changes in the mortgage rates.

What the Euribor rise means for property buyers and owners in Spain

Looking to buy property in Spain? Already a homeowner here? Well, you may have heard something about rising interest rates recently.

Or perhaps changes to the terms of your mortgage. Or the Euribor – but what is it, and what’s going on?

What is Euribor?

In Spain, Euribor is the interest rate most often used to work out mortgage payments and to calculate both variable and fixed rates.

It is anchored to the interest rate set by the European Central Bank, and, as we are now seeing, quite responsive to global economic events.

It’s the interest rate that banks in the Euro Zone use to lend to each other, so when the base rate goes up, the Euribor does too, which sends mortgage interest rates across the Eurozone rising. 

Rising rates

Most Spanish mortgages with variable rates normally vary based on a variety of factors, but this number has been rising and in May 2022 saw figures of 0.240 percent (Tuesday May 17th), well above the average. 

The rises throughout May are leading many in Spain, and indeed across Europe, to wonder how high their mortgage rates can go, and when the rises will stop.

Banco de España has estimated that the increases could range from anything between €35 a month to an additional €400. Bankinter predicts the Euribor rate will finish the year at a staggering 0.40 percent, but, more encouragingly, Caixabank’s prediction puts it at just 0.13 percent by the end of 2022.

On Euribor.com.es, a website that tracks the index on a daily basis, they suggest that the market consensus predicts the Euribor will finish at around 0.3 percent at the end of the year, but could reach as high 0.8 percent in 2023.

All of them agree, and most other economic indicators suggest, that whatever the figure at the end of the year, it will remain positive, so it seems almost certain that mortgages will continue to rise throughout 2022 at the very least.

This instability, in addition to global inflation and supply chain problems, could mean that mortgage rates will be affected at least until 2023, with some predictors even signposting 2024 as the possible end of a rise in mortgage prices.

With things uncertain in the mortgage industry, and the world economy more broadly, perhaps you’re thinking of ways to try and insulate yourself from the climbing interest rates.

How to protect yourself from the rising rates

One way to weather the storm of interest rate increases is to change your mortgage from a variable to a fixed rate, either by negotiating with the your bank or by changing bank altogether – a process known as subrogation.

According to data from MyInvestor, during March and April the number of subrogations has started to rise.

Subrogation basically means switching the mortgage from one bank to another to change its interest rate. Although it does involve certain charges in order to do so – you pay the valuation of your house, which normally costs a few hundred euros, and a fee charged to the bank you are leaving, which can cost up to 2 percent of the outstanding amount – it could, and probably would, work out cheaper than paying the hiked interests rates over time.

You could also try and take out a new mortgage with another bank and use the borrowed money to settle the loan. This is, of course, a more expensive option as you have to pay the appraisal, the commission for early repayment of the current credit (again, up to 2 percent of the outstanding amount) and the expenses associated with its cancellation of registration, which normally runs to around €1,000.

READ ALSO: Spanish mortgages – Ten things foreigners should know before getting one

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