COVID-19 has meant the application of social and economic measures never seen before in Spain, or in the rest of the World. The measures of confinement and hibernation of the economy, during the months of March, April and part of May, have led to important changes for the electricity sector. Electricity demand has fallen, accentuating the drop in pool prices that were already occurring before COVID-19.
This drop in demand and prices implies lower revenues for the electricity sector for two reasons: A reduction in revenues from end user tolls as well as lower income from the generation tax (7%).
Analysis carried out by EKON Strategy Consulting conclude that in 2020 the Spanish electricity sector will generate a tariff deficit of between €1 and €1.7 billion, a figure that, despite not being as large as several tariff deficits generated in the past, reinforces the change in trend. From 2014 until 2019, the Spanish electricity sector had consistently generated a surplus, as the data shows.
However, there is no reason to be alarmed by the reappearance of the tariff deficit, since there are different measures to deal with it, for example, the government has already announced its intention to finance the tariff deficit with the National Budgets, so investors do not fear again the reappearance of measures that increase regulatory risk in the past. For 2021, the scenario is more optimistic, post-COVID-19, we are forecasting a +4% recovery in demand, which together with the recovery of the international gas market should see the pool price recover to levels above 40 euros / MWh. All this will rebalance the accounts of the electricity system, returning to the path of surpluses.