New electricity bill

1 June, 2021

Energy poverty will inevitably grow with the new electricity bill.
Energy poverty will inevitably grow with the new electricity bill.

Last night [in Spain -TN], the new electricity bill came into force. Although the Green Deal is already being felt in the general price increase, this is the first direct move that ties the energy transition to the loss of workers’ purchasing power. It is sold to us as a price drop made possible by renewables. In reality it is quite the opposite.

Table of Contents

The main novelty of this new electricity bill: the hourly rates

Hourly segments of the new electricity bill
Hourly segments of the new electricity bill

The main new feature are the time slots. What are the peak times when electricity consumption will be penalized? Those for preparing lunch and dinner, which are also those of typical family consumption: washing machine, dishwasher, showers… Depending on whom we ask, the average price increase will range from 10% to almost 20%.

But don’t they tell us that we will save money and pay less? Only if we move our usage to nighttime hours. Problem: waiting until nighttime to dry our hair, run washing machines, dishwashers and the slow cooker to cook for the next day isn’t enough either…. We must use them sequentially, one after another… or contract for that segment a tariff corresponding to a higher power rating.

What everyone agrees on is that with the new rate the real beneficiaries will be the owners of facilities with a power between 10 and 15 kW… that is, stores, workshops and large family residences. For them, the reduction in tolls and charges will mean significant savings on their bills. Access to energy is a matter of class.

Why this change now?

The cyclical problems of wind and solar are one of the causes of the new electricity bill.
The cyclical problems of wind and solar are one of the main drivers of the new electricity bill.

The energy transition is increasing the weight of wind and solar power sources for electricity generation. These energies actually represent a step backward with respect to the logic of capitalist production. One of the first great conquests of rising capitalism was to make industrial production independent of the natural cycle of day and night, of the week and the seasons.

What is happening now? Wind power tends to generate more output overnight, solar suddenly stops when it gets dark and drives prices up dramatically. The distortions caused by that in prices throughout the week — such as the famous duck-shaped cost curve characteristic of photovoltaic power – and within the day are brutal.

These fluctuations are compensated for by nuclear and hydroelectric power… and fossil fuels. But if, during off-peak hours, all renewables are to meet a substantial part of demand, it will require an installed capacity that will remain largely unused during peak production hours (overnight and during the day, while peak consumption happens in the evening)… jeopardizing the investments made in wind farms and solar plants.

If you want to increase, as planned, even more the share of renewables without blackouts due to an inability to meet demand and without oversizing the wind power farms… you need to shift consumption patterns.

A fine example of how time and again contradictions appear between human needs and the requirements of capital profitability, whose resolution is twisted over and over again by the state against the workers.

A last-minute fix

Evolution of allowance prices per ton of CO2. One of the driving forces behind the new electricity bill.
Evolution of emission allowance prices per ton of CO2. One of the drivers behind the new electricity bill.

The government however does not wish to stir up resistance to the Green Deal too soon. Given the true disinformation strategy they are pursuing, it must have seemed prudent for them not to accelerate too quickly the transfer of income from labor to capital implied by the new electricity bill. So, at the last minute Minister Calviño announced today the approval tomorrow of a decree law that will modify the way hydroelectric and nuclear power plants are remunerated in order to reduce their margins.

These margins are outrageous because these facilities have long been paid off and have very low production costs. However, in the Spanish auction model, the company with the cheapest prices places all its production, but it is the last purchased input – the most expensive one – which determines the price that will be paid to all other producers in each auction.

The system was designed to reward solar and wind power by creating an incentive to build more … while providing windfall profits to power companies for their nuclear and hydroelectric plants with which to fund their renewable expansion.

To understand the move, it should be noted that fossil fuels are not actually more expensive per se. They are more expensive because they are surcharged with CO2 emission rights. These allowances have a capped supply controlled by the EU and governments that ensures a wild speculation market which in turn has produced record after record high prices since last November. As a result: a greater percentage of the auctions go to renewables… but the more expensive the electricity becomes, which keeps breaking utility price records .

The new electricity bill will inevitably reflect this, although in the short term the government’s last-minute patch will cushion the first blow by reducing the margins of the big power companies.

But the fact is that the price per ton of CO2 has gone from just over €23.5 last October to €51.8 today and speculators are betting that the price per ton of CO2 will exceed €60 this year, an expectation implicitly acknowledged by Calviño today. And if that is true, the average bill, even if we start living at night to compensate for the shortcomings of the renewable electricity system, will give us a good scare before Christmas.