Power prices surge in Portugal as it suspends Spain link after blackout
Lisbon paused imports from its neighbour ‘as a precaution’ after catastrophic blackout on April 28
Portugal is enduring a dramatic surge in electricity prices after deciding to temporarily slash its power imports from Spain, whose grid collapse last week triggered a blackout across the Iberian peninsula.
Wholesale electricity prices in Portugal were nearly five times higher than those in Spain earlier this week as Lisbon halted imports from its neighbour. Usually the two countries pay roughly the same for power.
The Iberian peninsula functions as an “energy island” in which Portugal last year imported one-fifth of its electricity from its neighbour, but the power wipeout that began in Spain on April 28 has created tensions between the two countries.
In the aftermath of the still unexplained power outage, Maria da Graça Carvalho, Portugal’s energy minister, said her country was suspending electricity imports from Spain “as a precaution”.
Five days after the blackout, on Saturday, her country’s electricity prices began to climb far above those of its neighbour. The gap reached a peak on Tuesday, when Spain’s average wholesale price was €10.24 per megawatt hour but Portugal’s leapt to €47.92/MWh.
The price jump will not immediately hit most households or businesses that pay prices set in longer-term contracts.
REN, Portugal’s grid operator, told the Financial Times that the decision to “close the importation” from Spain was “made to ensure the safety of the Portuguese national electric system”.
Imports remained suspended on Wednesday. When REN restarted limited inflows from Spain on Thursday, the price gap narrowed. Spain’s average electricity price that day was €16.76/MWh versus €41.86/MWh in Portugal, according to OMIE, the Iberian market operator. OMIE’s “day ahead” prices for Friday showed the gap should narrow further.
REN has said it would limit import capacity to 1,000 megawatts per day up until May 12, a level that is less than one-fifth of Portugal’s maximum daily imports in recent years.
The grid operator stressed that although the “trade” in electricity had been paused, cross-border connections had remained open to facilitate the technical balancing of the Iberian system “if needed”.
Energy minister Carvalho told the FT: “A comprehensive and phased plan to fully normalise energy trade between the two countries is currently under development, with the dual objective of ensuring operational security and market stability.”
The Spanish and Portuguese electricity systems have been integrated since the 1980s. In recent years Lisbon has benefited from Spain’s rapid rollout of solar power plants, which has given it access to abundant cheap power.
“In Portugal we have been delayed in solar power generation compared to Spain,” said João Peças Lopes, a professor of electrical engineering at Porto university. “The electricity produced in Spain is cheaper than what’s produced in Portugal, so why not profit from it?”
It is common for spot electricity prices to fall to zero in the afternoon in Spain because the country produces so much solar power.
Armindo Monteiro, head of CIP, Portugal’s main business lobby, said his country “does not and should not live in electric isolation”, arguing that its access to low-cost Spanish power boosted its economic competitiveness. “But it is necessary to reflect on the appropriate and necessary security conditions for the current level of dependence,” Monteiro added.
A few minutes before last week’s blackout, Portugal was importing 35 per cent of its electricity from Spain, according to REN. Lopes noted that Portugal was using some of that electricity to pump water uphill at hydroelectric plants dubbed “water batteries”, which provide a form of storage.
After the blackout, Portugal was able to use those hydroelectric plants to restore power on its own. Spain had to rely on France and Morocco, via its interconnections with those countries, to get its system back online.