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Spain, Portugal Allowed To Use State Aid To Ease Energy Spike Burden

Spain and Portugal have received EU approval to use a combined $9 billion of government funds to help lower input costs of fossil fuel-fired power stations and thus, energy bills.

Spain and Portugal have already set a cap on the price of gas used for generating electricity after the EU allowed them to do so, acknowledging their exceptional energy requirements. The two countries are one of the least dependent on Russian gas among all EU members.

Both countries, however, are looking to help consumers and industries with skyrocketing power and fuel prices, especially after the Russian invasion of Ukraine roiled the global energy markets.

Spain and Portugal notified last month the European Commission of their intention to spend $6.7 billion (6.3 billion euro) and $2.2 billion (2.1 billion euro), respectively, to lower the input costs of fossil fuel-fired power stations. The ultimate goal of the expenditures is to reduce production costs and, ultimately, the price in the wholesale electricity market, to the benefit of consumers.

The Commission has to rule on such cases as it has to find if government aid is compatible with the EU state aid rules. Considering that “the Spanish and Portuguese economies are experiencing a serious disturbance,” and that the measure doesn’t distort the Iberian or EU market and doesn’t lead to trade discrimination or restriction, the EC approved the measures under EU state aid rules. This is a temporary measure and will apply for a year, until May 31, 2023.

Spain’s Prime Minister Pedro Sánchez said on Thursday the measure would immediately cut household electricity prices by up to 20%, AP reports.

Spain has also adopted some measures to conserve energy. Last month, the government passed a decree limiting the use of air conditioning in public buildings as part of a strategy to conserve energy and reduce Europe’s dependence on Russian gas. Spain itself does not depend on gas from Russia, but its government is working to increase energy efficiency as the European Union looks to reduce reliance on Russian gas by two-thirds by the end of this year alone. The limits to the use of air conditioning measures are expected to apply “whenever it is technically possible,” and are part of the goal to reduce consumption and bills.

By Tsvetana Paraskova for Oilprice.com

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