An assessment of the Iberian Exception to control electricity prices

Journal title ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT
Author/s Pedro Linares, Tomás Gómez San Román
Publishing Year 2023 Issue 2023/1 Language English
Pages 12 P. 5-16 File size 151 KB
DOI 10.3280/EFE2023-001001
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The Iberian Exception, the mechanism designed by the Spanish and Portuguese governments to address high electricity prices resulting from the gas price crisis in 2021 and 2022, has been met with controversy, both regarding its real impact on electricity prices and also its unin- tended consequences, such as increased (and subsidized) exports to France. In this paper we review the evidence on these impacts from different studies, concluding that the mechanism may have produced, depending on the assumptions, some reductions in electricity prices for Iberian consumers or none at all, but always at the expense of subsidies to French consumers and also increased rents for gas combined cycles, higher gas consumption, and larger CO2 emissions. Alternative mechanisms, such as a temporary single-buyer scheme, might have produced similar benefits without the downsides of the Exception.

Keywords: natural gas, electricity prices, market design.

Jel codes: L51, L94, Q48

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Pedro Linares, Tomás Gómez San Román, An assessment of the Iberian Exception to control electricity prices in "ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT" 1/2023, pp 5-16, DOI: 10.3280/EFE2023-001001