IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v188y2024ics0301421524001125.html
   My bibliography  Save this article

The Iberian exception: Estimating the impact of a cap on gas prices for electricity generation on consumer prices and market dynamics

Author

Listed:
  • Hidalgo-Pérez, Manuel
  • Collado, Natalia
  • Galindo, Jorge
  • Mateo, Ramón

Abstract

As the volatility of short-term energy market prices increases due to exogenous shocks and the changing nature of the energy mix, market interventions are gaining importance in the policy debate. Accurate and robust quantification of their impact is becoming therefore essential. This paper conducts a causality analysis to evaluate the Spanish “gas cap” for electricity generation during the 2022 energy crisis. We use Bayesian structural time series models to isolate its impact on affected consumers, primarily those under the regulated tariff, from June to December 2022. Our results show that the mechanism successfully lowered prices compared to a counterfactual scenario without the intervention. However, the policy also led to an increase in electricity generation from gas-fired combined cycle plants. In addition, exports to France increased by over 80% after implementation, as Spanish wholesale prices became cheaper than French prices. Our analysis (1) provides an accurate quantification to date of one of the most consequential energy market interventions in recent years; (2) demonstrates the fruitful use of a novel evaluation method for energy policy; (3) highlights the trade-off between the short-term goal of consumer price relief and the long-term goals of fossil fuel reduction and decarbonisation.

Suggested Citation

  • Hidalgo-Pérez, Manuel & Collado, Natalia & Galindo, Jorge & Mateo, Ramón, 2024. "The Iberian exception: Estimating the impact of a cap on gas prices for electricity generation on consumer prices and market dynamics," Energy Policy, Elsevier, vol. 188(C).
  • Handle: RePEc:eee:enepol:v:188:y:2024:i:c:s0301421524001125
    DOI: 10.1016/j.enpol.2024.114092
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421524001125
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.enpol.2024.114092?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. David Robinson & Angel Arcos-Vargas & Micheael Tennican & Fernando N'u~nez, 2023. "The Iberian Exception: An overview of its effects over its first 100 days," Papers 2309.02608, arXiv.org, revised Sep 2023.
    2. Mosquera-López, Stephanía & Uribe, Jorge M. & Manotas-Duque, Diego Fernando, 2017. "Nonlinear empirical pricing in electricity markets using fundamental weather factors," Energy, Elsevier, vol. 139(C), pages 594-605.
    3. Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2010. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program," Journal of the American Statistical Association, American Statistical Association, vol. 105(490), pages 493-505.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Francesco Ravazzolo & Luca Rossini & Andrea Viselli, 2025. "Modeling European Electricity Market Integration during turbulent times," Working Paper series 25-06, Rimini Centre for Economic Analysis.
    2. Uxó, Jorge & Febrero, Eladio & Álvarez, Ignacio, 2025. "Prices, markups and wages: inflation and its distributive consequences in Spain, 2021-2023," Structural Change and Economic Dynamics, Elsevier, vol. 72(C), pages 179-192.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Manuel Hidalgo-Pérez & Jorge Galindo & Natalia Collado & Ramón Mateo, 2023. "The Iberian exception: estimating the impact of a cap on gas prices for electricity generation on consumer prices and market dynamics," Working Papers 23.08, Universidad Pablo de Olavide, Department of Economics.
    2. Pedro Linares & Tom?s G?mez San Rom?n, 2023. "An assessment of the Iberian Exception to control electricity prices," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2023(1), pages 5-16.
    3. Daniel Albalate & Germà Bel & Ferran A. Mazaira-Font, 2020. "Ensuring Stability, Accuracy and Meaningfulness in Synthetic Control Methods: The Regularized SHAP-Distance Method," IREA Working Papers 202005, University of Barcelona, Research Institute of Applied Economics, revised Apr 2020.
    4. Bruno Ferman & Cristine Pinto & Vitor Possebom, 2020. "Cherry Picking with Synthetic Controls," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 39(2), pages 510-532, March.
    5. Sondang Marsinta Uli Panggabean & Mahjus Ekananda & Beta Yulianita Gitaharie & Leslie Djuranovik, 2025. "Export proceeds repatriation policies: A shield against exchange rate volatility in emerging markets?," Papers 2506.09168, arXiv.org.
    6. Manuel Funke & Moritz Schularick & Christoph Trebesch, 2023. "Populist Leaders and the Economy," American Economic Review, American Economic Association, vol. 113(12), pages 3249-3288, December.
    7. Maximiliano Marzetti & Rok Spruk, 2023. "Long-Term Economic Effects of Populist Legal Reforms: Evidence from Argentina," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 65(1), pages 60-95, March.
    8. De los Santos, Babur & Kim, In Kyung & Lubensky, Dmitry, 2018. "Do MSRPs decrease prices?," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 429-457.
      • Babur De los Santos & In Kyung Kim & Dmitry Lubensky, 2013. "Do MSRPs Decrease Prices?," Working Papers 2013-13, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    9. Stefano Costalli & Luigi Moretti & Costantino Pischedda, 2014. "The Economic Costs of Civil War: Synthetic Counterfactual Evidence and the Effects of Ethnic Fractionalization," HiCN Working Papers 184, Households in Conflict Network.
    10. Matthias Krapf & David Staubli, 2020. "The Corporate Elasticity of Taxable Income: Event Study Evidence from Switzerland," CESifo Working Paper Series 8715, CESifo.
    11. Chiara Cavaglia & Sandra McNally & Henry G. Overman, 2020. "Devolving Skills: The Case of the Apprenticeship Grant for Employers," Fiscal Studies, John Wiley & Sons, vol. 41(4), pages 829-849, December.
    12. Nicholas Moellman, 2020. "Healthcare and Hunger: Effects of the ACA Medicaid Expansions on Food Insecurity in America," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 42(2), pages 168-186, June.
    13. Nishitateno, Shuhei & Burke, Paul J., 2021. "Willingness to pay for clean air: Evidence from diesel vehicle registration restrictions in Japan," Regional Science and Urban Economics, Elsevier, vol. 88(C).
    14. Sheng, Yu & Xu, Xinpeng, 2019. "The productivity impact of climate change: Evidence from Australia's Millennium drought," Economic Modelling, Elsevier, vol. 76(C), pages 182-191.
    15. Mthuli Ncube & Basil Jones, 2014. "Working Paper 197 - Estimating the Economic Cost of Fragility in Africa," Working Paper Series 2105, African Development Bank.
    16. Sadeghi, Ali & Kibler, Ewald, 2022. "Do bankruptcy laws matter for entrepreneurship? A Synthetic Control Method analysis of a bankruptcy reform in Finland," Journal of Business Venturing Insights, Elsevier, vol. 18(C).
    17. Davide Viviano & Jelena Bradic, 2019. "Synthetic learner: model-free inference on treatments over time," Papers 1904.01490, arXiv.org, revised Aug 2022.
    18. repec:osf:osfxxx:s8ayp_v1 is not listed on IDEAS
    19. Pierfrancesco Rolla & Patricia Justino, 2022. "The social consequences of organized crime in Italy," WIDER Working Paper Series wp-2022-106, World Institute for Development Economic Research (UNU-WIDER).
    20. Mayank Aggarwal & Anindya S. Chakrabarti & Chirantan Chatterjee, 2023. "Movies, stigma and choice: Evidence from the pharmaceutical industry," Health Economics, John Wiley & Sons, Ltd., vol. 32(5), pages 1019-1039, May.
    21. Jan Bruha & Jaromir Tonner, 2018. "An Exchange Rate Floor as an Instrument of Monetary Policy: An Ex-Post Assessment of the Czech Experience," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 68(6), pages 537-549, December.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:188:y:2024:i:c:s0301421524001125. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.