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January closed with an average wholesale electricity price in Portugal and Spain above 200 euros per MWh. Futures contracts suggest high prices will persist into Q1 2023

The Iberian electricity market (Mibel) closed January with an average wholesale price of 201.89 euros per megawatt hour (MWh), the highest price ever for a month of January in Portugal and Spain and the second most expensive month in history. Mibel, just behind the 239.27 euros per MWh recorded in December.

According to data from OMIE, the operator of the Mibel daily market, the average price of production contracted for this Monday, January 31, will be 223.95 euros per MWh, which, being far from a record, maintains the wholesale market of the Iberian Peninsula in a trend of high prices, which insist on not giving in, given the persistence of high prices for natural gas and limited supply capacity of hydroelectric plants, which are facing a particularly dry year.

Looking at the last four years, the average monthly price of electricity in Mibel was around the range of 50 to 60 euros per MWh, and until the beginning of last year’s record price wave, the most expensive month had been September 2018, with 71 euros per MWh. After that, the pandemic (but also the weather) brought lower wholesale prices, with April 2020 closing at 17.77 euros per MWh of average price.

The year 2021 also brought in February an especially cheap month (28 euros per MWh), but since then the Mibel has started a price escalation, which has become particularly worrying from the middle of the year. In August 2021, the wholesale price of electricity in Portugal and Spain exceeded 100 euros per MWh and did not return below that level.

The OMIE data analysed by Expresso show that the last four months have marked a “new normal” of electricity transacted at around 200 euros per MWh, an expensive level by the historical standards of the Iberian market (which averaged around 50 to 60 euros until 2020) and which is starting to reach several intensive electricity consumers, penalizing their cost structures.

Looking ahead, the scenario is adverse for at least another year, taking into account the futures contracts of Mibel’s forward market operator, OMIP.