Spain breaks daily record gas demand for power

By Isla Binnie

MADRID (Reuters) - Spanish power plants bought more natural gas to generate electricity on Wednesday than on any other day since records began, transmission system operator Enagas said on Thursday.

Extreme early summer heat is raising demand for electric air conditioning just as cheaper, renewable sources of power are contributing less to the system, meaning more expensive gas-fired plants are making up the shortfall.

European governments are struggling to manage surging energy costs, as Russia's invasion of Ukraine raises the spectre of supply disruptions in a market already stretched to meet strong post-COVID 19 demand.

Europe's benchmark gas price, which influences the cost of power, has risen 400% over the past year.

Gas-fired power plants in Spain took delivery of 764 gigawatt hours (GWh) of the fuel on Wednesday, surpassing the previous record of 754 GWh reached on June 20, 2008, Enagas said.

Since late last week, the earliest heatwave since 1981 has sent temperatures above 40 Celsius (104 Farenheit).

Hydro, wind and solar generation have all fallen, Enagas said, partly due to a dusty haze which reduces solar panels' ability to generate power from the sun.

In a bid to reduce the influence of high gas prices on electricity bills, Spain and Portugal have started temporarily subsidising fossil fuel plants' generation costs, while aiming to build more renewable capacity in the long term.

Electricity for the following day was trading at 177 euros ($187.27) per megawatt hour on the Spanish wholesale market on Thursday, compared with 303 euros in neighbouring France, the energy and environment ministry said.

However, the cost of paying gas plants the difference between the market price and a new, capped price raised the total cost to 266 euros. Without the new mechanism, the ministry said the price would have been close to 300 euros.

Spanish consumers are more exposed than their counterparts in many other countries to swings in power markets because many of them buy power on contracts tied to fluctuating wholesale prices. ($1 = 0.9452 euros)

(Reporting by Isla Binnie, editing by Deepa Babington)