Why the Iberian gas price cap is not a role model

Power pole in Spain

Because of the energy crisis, Spain now produces its electricity mainly from gas.

(Photo: Bloomberg/Getty Images)

Madrid In the fight against skyrocketing electricity prices, some EU countries are insisting on a gas price cap, such as that introduced by Spain and Portugal in June. In Spain, the gas price for electricity generation is capped at an average of 50 euros per megawatt hour for a year.

But the results of the price cap are mixed: the Spaniards’ electricity costs are 17 percent lower than without the measure. However, the cap also has undesirable side effects: Gas consumption for electricity production in Spain has risen significantly this year, while it has fallen in other countries. This is not only, but also due to the artificially capped gas price.

The gas price cap has fueled demand for cheap Spanish electricity in France. Normally, the French export electricity to Spain and not the other way around. Because of its numerous decommissioned nuclear power plants, France had previously imported more electricity from Spain than in normal times.

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