With a marginal system for the daily electricity market, the combination of the lack of sufficient low-cost electricity sources (including renewables), and a thermal gap that which can only be covered by CCGTs using natural gas, makes the price of electricity in the Iberian daily market linked to the cost of generating with a CCGT.
In order to project electricity prices we need a projection of natural gas and CO2 prices. The problem is that whatever combination we use, the market evolves rapidly and the results become outdated very quickly.
And that uncertainty also affects futures markets. When the spot price of natural gas rises, so do the futures. The daily gas contract in MIBGAS was at 138.68 EUR/MWh(f) on Thursday, December 16, while the 2022 annual contract was at 92.51 EUR/MWh(f), the daily electricity contract in OMIP was at 309.20 EUR/MWh(e), and the 2022 contract at 218.09 EUR/MWh(e).
Well, on July 16 there were the same gas contracts at 34.25 EUR/MWh(f) and 25.78 EUR/MWh(f) and those for electricity at 90.95 EUR/MWh(e) and 73.00 EUR /MWh(e).
In five months, everything is three times more expensive!