(MENAFN) Spain and Portugal have announced they will extend the price cap on natural gas until the end of the year. The announcement was made by Spain's Energy Minister, Teresa Ribera, who also confirmed that the European Commission has backed the plan. Ribera stated that the extension will be formally adopted after the Spanish government passes it later on Tuesday.
The Iberian mechanism to lower energy prices was introduced in June after the war in Ukraine caused natural gas prices to soar. The extension of the price cap is considered good news for Spain and Portugal. A study by the Esade Center for Economic Policy found that the Iberian mechanism saved each household paying regulated energy bills in Spain an average of €209 (USD225) last year. The study also highlighted that the mechanism helped Spanish consumers save nearly €2.1 billion and lowered inflation by 0.3 percent in 2022.
The Spanish government has stated that the Iberian mechanism had saved a total of €5.1 billion by the end of February. The mechanism was due to expire on May 31, but the extension means that it will continue until the end of the year. However, Ribera had previously expressed the hope that the price cap would be extended until the end of 2024.
Spain and Portugal managed to convince other EU nations to allow them to enact a price cap on natural gas last spring after long debates. Under the previous system, expensive gas was driving up the price paid on all energy, including cheaper renewable sources. Spain and Portugal are relatively isolated from the European power grid.
Last week, Spain's grid operator predicted that renewables could make up half of the country's power generation this year, up from 42 percent in 2022. The extension of the price cap on natural gas is expected to further support the growth of renewable energy in Spain and Portugal, as it will help to keep energy prices down and make renewable sources more competitive.
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