(Bloomberg) -- A heat wave in Spain is boosting demand for air conditioning leading to higher power prices as gas plants fire up.
Hot air from Africa is pushing maximum temperatures to 44C in parts of Spain causing average day-ahead power prices to rise above equivalent contracts in Germany and France.
Average prices in the Iberian nation have increased more than four-fold since April. Spain gets more than half of its power from solar panels and in spring, before the heat cranked up, high volumes pushed prices down to an 11-year low. So far in July, the day-ahead contract has averaged €67 a megawatt-hour, according to auction data from the OMIE exchange.
The share of total renewable generation meeting power demand dropped to 58% in July from around 70% in March, Sabrina Kernbichler, lead power analyst at Energy Aspects Ltd. said. Gas
In part that’s due to declining hydropower levels which were very high in the first half of the year. Hydro output for Iberdrola SA, Spain’s second-largest power producer, surged 61% in the second quarter. Output so far this year is close to recent average annual generation.
Average solar output for July is about 50% higher than in April, according to Robert Jackson-Stroud, EU market power analyst at ICIS. The increase in demand for cooling has “more than eclipsed” solar generation, he said.
Peak demand in Spain is forecast to reach close to 38 gigawatts on Wednesday night, according to grid operator Red Electrica. That’s 5.6% higher than last week.
When demand surges above the available supply of green power, Spain switches on gas-fired power to bridge the gap. Non-renewable power was contributing 35% of generation on Wednesday, Red Electrica data show.
Spain’s gas injections have stalled in the last 10 days, as the nation uses more fuel for power generation, according to Gas Infrastructure Europe.
Prices for Wednesday settled at €89.26 a megawatt-hour. In France, the equivalent contract settled at €53.89 and €79.28 a megawatt-hour on Epex Spot SE.
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