The move came a week after the European Union agreed that Spain and Portugal could deviate from the bloc’s rules on energy pricing to ease the impact of energy prices on consumers.
Spain and Portugal are in a strategically advantageous position in that they’re not as dependent on Russian natural gas as many of their European neighbours, importing most of it from Algeria and other countries.
Spain is also the country with the largest gas storage and regasification capacity in Europe and together with Portugal is a renewable energy leader in terms of solar, hydraulic and wind power. Their energy markets are more self-sufficient and extremely well connected between both nations.
This has led the two countries that form the Iberian peninsula (as well as tiny Andorra) to be referred to as an “energy island” by Spanish Prime Minister Pedro Sánchez and his Portuguese counterpart António Costa, as a simplified way of describing why their countries should be temporarily released from the EU’s common market rules.
The decision to grant Spain and Portugal “special treatment” came after their efforts to convince Brussels to decouple electricity prices from the gas market fell on deaf ears.
“We have a joint proposal… and we’re working with the European Commission” to push it through, Teresa Ribera told reporters.
The proposal involves capping the price of gas used for the generation of electricity to the equivalent of “€30 ($33)” per megawatt hour, she said.
Such a cap, which would significantly reduce the price of electricity on the wholesale market in both countries, “is one of the technical elements of the proposal we need to discuss with Brussels”, she said.
Prices are particularly high in the Iberian peninsula, with both Spain and Portugal heavily dependent on gas to produce electricity.
Prices have risen sharply in both countries in recent months due to the rules governing Europe’s electricity market which obliges producers to sell electricity on the wholesale markets at a price determined by the most expensive production costs — that of gas-fired power plants.