Read news from:
Austria
SHARE
COPY LINK
For members

ELECTRICITY

Why is electricity in Spain more expensive than ever?

Spain now pays one of the highest prices for electricity in the whole of the EU. What's behind the recent price hikes and how can you save money on your bill?

Published: 22 July 2021 13:23 CEST
Why is electricity in Spain more expensive than ever?
"Poorer every day": People demonstrate against their rising electricity bills in Barcelona on June 5th, 2021. Photo: Pau Barrena/AFP

What’s happened?

The price of electricity in Spain has been rising for more than a year, but on July 21st 2021, it reached a new historic high of €106.57 / MWh, according to data from the Iberian Electricity Market Operator (OMIE).

This amid an economic crisis due to the Covid-19 pandemic and a national heatwave, has dealt another blow to Spanish pockets and has caused a wave of complaints.

Spain currently pays one of the highest prices for electricity in the whole of the EU and today’s price of €101.52 / MWh is only superseded by Italy. Electricity in Spain now costs 13 percent more than in France and Germany.

Today’s minimum is set at €100.83 / MWh, while the maximum will reach €110.64 / MWh.

However, it’s worth remembering that the price of electricity only represents 24 percent of the final electricity rate that we end up paying on our bills.

Why has it gone up so much?  

In July 2021 alone, 11 of the 16 highest electricity prices in history have already been recorded according to OMIE data since 1998, without taking inflation into account.

To understand why the electricity price has gone so high, we need to look at several different factors. Firstly, there is an increase in demand. It began with the severe cold snap in the winter and continued with the current rise in temperatures, with much of the country now experiencing a heatwave.

Another factor that is causing these steep price increases has to do with the price of gas and CO2 rights.

The price of gas is now also at record levels, with a cost of €37.48 / MWh, according to MIBGAS data. This affects the electricity price because when there is not enough clean energy available, companies have to turn to gas, and when more CO2 is emitted, there are more taxes to pay on the electricity generated.

These price hikes are not unique to Spain however. Electricity prices are rising throughout the EU. In Italy, the current price is €103.37/ MWh and the price in Portugal matches that of Spain at €101.52 / MWh.

Why does Spain pay so much for its electricity? Photo: Michael Schwarzenberger / Pixabay

What does the Spanish government say?

When the electricity prices rose in June, the Spanish government decided to suspend the seven percent value added tax on energy for three months to help compensate for the rise. Nevertheless, this is not yet translated into a price reduction.

As the price of electricity continues to rise, the Spanish government is unable to contain it and is powerless to do much to stop it. 

Francisco Valverde, an analyst of the electricity market from Grupo Menta, told Spanish website Xataka “This is how most markets work, not just electricity. There are a lot of generators and there are a lot of buyers. Then there is an algorithm that orders those offers and one that determines the price… There are many people who want to change this, but Spain cannot do anything about it. All of Europe has this system”. 

Because of this, the government has demanded that the EU urgently change the price of electricity, due to the historic rise.

What will happen next?

Without help from the EU, the Spanish government has conceded that the electricity price is likely to continue rising until the end of this year.

“The solution is not simple”, Ramón Roca, director of El Periódico de la Energía says.

“The Government does not have a large margin to play with, unless it touches on things that have nothing to do with the electricity price. That is why it can only reduce taxes, take out the premiums for renewables or add the debt to The General State Budget (PGE),” he explained.

How can I keep electricity costs down?

Even though electricity prices are rising dramatically, there are a few things you can do to help keep your energy bills down.

On June 1st 2021, the electricity rates changed and there are now different times throughout the day when it is cheaper and more expensive. If you want to keep your bills down, avoid using more electricity between 10am – 2pm and in the evenings from 6pm – 10pm, Monday to Friday.

The times with the medium electricity prices are between 8am – 10am, 2pm – 6pm and 10pm – midnight, while the cheapest times are early mornings on weekdays and all day on weekends, as well as national holidays.

This might mean only putting your washing machine on at weekends, putting your dishwasher on at night (if you’re sure it won’t disturb the neighbours), and only putting your air-con on during the medium or low electricity times.

You can also save money by avoiding putting all your devices on at once. Don’t use your iron and dishwasher at the same time for example.

For more tips on cutting your electricity costs read our article on Spain’s new electricity rates for 2021: the tricks to help you save up to €300 a year.

Member comments

  1. There seems to be more power cuts as well. There doesn’t seem to be any incentive for the electricity companies to be more efficient and to improve their customer service. In my view, the Spanish Government should start fining these companies and offering compensation to customers.

Log in here to leave a comment.
Become a Member to leave a comment.

MONEY

Rampant branch closures and job cuts help Spain’s banks post huge earnings

Spain’s biggest banks this week reported huge profits in 2021 and cheered their return to recovery post-Covid, but ruthless cost-cutting in the form of thousands of layoffs, hundreds of branch closures and the removal of many ATMs have left customers in Spain suffering, in this latest example of ‘Capitalismo 2.0’. 

Published: 3 February 2022 13:34 CET
A man withdraws cash from a Santander branch in Madrid.
More than 3,500 Santander workers lost their jobs in Spain in 2021 and a further 2,000 more employees working for Santander across Europe were also laid off. Photo: PHILIPPE DESMAZES / AFP

Spanish banking giant Santander on Wednesday said it has bounced back from the pandemic as it returned to profit last year, beating analyst expectations and exceeding its pre-COVID earnings.

Likewise, Spain’s second-largest bank BBVA said on Thursday that it saw a strong rebound in 2021 following the Covid crisis, tripling its net profits thanks to a recovery in business activity.

It’s a similar story for Unicaja (€137 million profit in 2021), Caixabank (€5.2 billion profit thanks to merge with Bankia), Sabadell (€530 million profit last year), Abanca (€323 million profit) and all of Spain’s other main banks.

This may be promising news for Spain’s banking sector, but their profits have come at a cost for many of their employees and customers. 

In 2021, 19,000 bank employees lost their jobs, almost all through state-approved ERE layoffs, meant for companies struggling financially.

BBVA employees protest against layoffs in May 2021 in Madrid. Spain’s second-largest bank BBVA is looking to shed 3,800 jobs, affecting 16 percent of its staff, in a move denounced by unions as “scandalous”. (Photo by GABRIEL BOUYS / AFP)

Around 11 percent of bank branches in Spain have also been closed down in 2021 as part of Spanish banks’ attempts to cut costs, even though they’ve agreed to pay just under €5 billion in compensation.

Rampant branch closures have in turn resulted in 2,200 ATMs being removed since the Covid-19 pandemic began, even though the use of cajeros automáticos went up by 20 percent in 2021.

There are now 48,300 ATMs in Spain, levels not seen since 2001.

READ MORE:

Apart from losses caused by the coronavirus crisis, Spain’s financial institutions have justified the lay-offs, branch closures and ATM removals under the premise that there was already a shift to online banking taking place among customers. 

But the problem has been around for longer in a country with stark population differences between the cities and so-called ‘Empty Spain’, with rural communities and elderly people bearing the brunt of it. 

 

Caixabank laid off almost 6,500 workers in the first sixth months of 2021. Photo: ANDER GILLENEA/AFP

Just this month, a 78-year-old Valencian man has than collected 400,000+ signatures in an online petition calling for Spanish banks to offer face-to-face customer service that’s “humane” to elderly people, spurring the Bank of Spain and even Spain’s Prime Minister Pedro Sánchez to publicly say they would address the problem.

READ MORE: ‘I’m old, not stupid’ – How one Spanish senior is demanding face-to-face bank service

It’s worth noting that between 2008 and 2019, Spain had the highest number of branch closures and bank job cuts in Europe, with 48 percent of its branches shuttered compared with a bloc-wide average of 31 percent.

Below is more detailed information on how Santander and BBVA, Spain’s two biggest banks, have reported their huge profits in 2021.

Santander

Driven by a strong performance in the United States and Britain, the bank booked a net profit of €8.1 billion in 2021, close to a 12-year high. 

It was a huge improvement from 2020 when the pandemic hit and the bank suffered a net loss of €8.7 billion after it was forced to write down the value of several of its branches, particularly in the UK. It was also higher than 2019, when the bank posted a net profit of €6.5 billion.

Analysts from FactSet were expecting profits of €7.9 billion. 

“Our 2021 results demonstrate once again the value of our scale and presence across both developed and developing markets, with attributable profit 25 per cent higher than pre-COVID levels in 2019,” said chief executive Ana Botin in a statement.

Net banking income, the equivalent to turnover, also increased, reaching €33.4 billion, compared to €31.9 billion in 2020. This dynamic was made possible by a strong increase in customer numbers, with the group now counting almost 153 million customers worldwide. 

“We have added five million new customers in the last 12 months alone,” said Botin.

Santander performed particularly well in Europe and North America, with profits doubling in constant euros compared to 2020. In the UK, where Santander has a strong presence, current profit even “quadrupled” over the same period to €1.6 billion.

Last year’s net loss was the first in Banco Santander’s history, after having to revise downwards the value of several of its subsidiaries, notably in the UK, because of COVID.

The banking giant, which cut nearly 3,500 jobs at the end of 2020, in September announced an interim shareholder payout of €1.7 billion for its 2021 results. “In the coming weeks, we will announce additional compensation linked to the 2021 results,” it said.

BBVA

The group, which mainly operates in Spain but also in Latin America, Mexico and Turkey, posted profits of €4.65 billion ($5.25 billion), up from €1.3 billion a year earlier.

The result, which followed a solid fourth quarter with profits of €1.34 billion, was higher than expected, with FactSet analysts expecting a figure of €4.32 billion .

Excluding non-recurring items, such as the outcome of a restructuring plan launched last year, it generated profits of 5.07 billion euros in what was the highest figure “in 10 years”, the bank said in a statement.

In 2020, the Spanish bank saw its net profit tumble 63 percent as a result of asset depreciation and provisions taken against an increase in bad loans due to the economic fallout of the virus crisis.

“The economic recovery over the past year has brought with it a marked upturn in banking activity, mainly in the loan portfolio,” the bank explained, pointing to a reduction of the provisions put in place because of Covid.

In 2021, BBVA added a “record” 8.7 million new customers, largely due to the growth of its online activities. It now has 81.7 million customers worldwide.

The group’s net interest margins also rose 6.1 percent year-on-year to €14.7 billion, said the bank, which is undergoing a cost-cutting drive.

So far, it has axed 2,935 jobs and closed down 480 branches as the banking sector undergoes increasing digitalisation and fewer and fewer transactions are carried out over the counter.

At the end of 2020, BBVA sold its US unit to PNC Financial Services for nearly 10 billion euros and decided to reinvest some of the funds in the Turkish market.

In November, it launched a bid to take full control of its Turkish lending subsidiary Garanti, offering €2.25 billion ($2.6 billion) to buy the 50.15 percent stake it does not yet own.

The deal should be finalised in the first quarter of 2022.

SHOW COMMENTS