16 Jun 2022 | 13:01 UTC

Spanish heatwave drives gas-fired generation to highest rate since 2009

Highlights

June 16 output seen at 363 GWh: grid operator

Operating rates to hit 59% on positive clean sparks

Gas cap cost reduction estimated at Eur15/MWh

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Spanish grid operator Enagas expects June 16 gas-fired power output to hit 363 GWh -- the highest daily level in record since 2017 -- amid a combination of a heatwave sweeping through the country, low hydro production and spike in export demand.

This means combined cycle gas turbine plants will hit an operating rate of 59% during the period, their highest rate since 2009, according to S&P Global Commodity Insights data.

Platts assessed Spanish day-ahead clean spark spreads (50% efficiency) at Eur11.08/MWh on June 15, compared to minus Eur26.98/MWh for Germany and minus Eur23.26/MWh for Netherlands.

The surge in gas consumption will see CCGTs cover 43% of all Spanish power generation on the day, as domestic demand touches 777 GWh for the second consecutive day on June 16, up 14% on the week, with high temperatures driving electricity demand.

Seasonally weak hydro levels and higher export demand due to a recently-implemented gas-for-power price cap are also helping drive gas consumption, with the volume of gas input seen at 700 GWh for the gas day ending June 16, according to Enagas data.

Spain's export demand increased to its highest since May 6, with 34 GWh scheduled for export to France and 36 GWh to Portugal.

From June 15, Spain and Portugal have been applying a Eur40/MWh cap on the price of gas used for power generation. This has resulted in a gross generating subsidy of Eur59.68/MWh and Eur88.20/MWh for the two days it has been in operation.

Portugal's Environment Minister Duarte Cordeiro said that for the first two days, the cap has resulted in a 6%, or Eur15/MWh, net cost reduction for consumers, according to business daily Jornal de Negocios and official state press agency Lusa.

On the Spanish side of the border, generating lobby group AELEC said that the most recent gas price spike has overshadowed the saving that the gas cap made, noting that the high demand and gas market pressure are temporary effects, a spokesman for the group said.