Government cuts VAT on gas and makes it easier for large consumers to “cut off” from the system to reduce demand
The cabinet on Tuesday approved a royal decree that includes several energy measures. The most direct impact on consumers is the reduction of VAT on gas from 21% to 5%. The solution, which also applies to pellets, briquettes and firewood, means savings for consumers of around 210 million euros.
The change in taxation is scheduled for December 31, as indicated by the Third Vice President and Minister of Environmental Transition and Demographic Challenges, Teresa Ribera, but it could be extended in next year’s budget.
In addition, in this Royal Decree, the government opens the possibility that co-production will temporarily waive its regulated remuneration regime in order to be subject to the Iberian system, the gas cap. Also creating new services that proactively respond to requests.
According to the manager, this last service increases the flexibility and safety of the electrical system. It includes, as Teresa Ribera points out, increasing the existing fragmentation system, since large enterprises can stop production if necessary. Now, thanks to this service, “the system is given flexibility” to reduce demand during peak hours, the minister said at a press conference after the meeting of the Council of Ministers.
Less demand during peak hours
The ministry has indicated that this new service will eliminate significant deviations in production and consumption that occur immediately before or at the time of delivery. In other words, if at the moment the direct consumers of the market, such as companies or municipalities, do not need to use energy, they can temporarily “disconnect” from the electrical system, giving a short warning; This will reduce energy consumption. A system that existed till now for large companies and is now being expanded.
“This service can be provided on demand in exchange for the financial income provided by the annual auction.” The new service will be operated by Red Eléctrica and customers will be compensated through an annual auction. All demand units can participate – marketers and direct consumers who consume more than one megawatt. The first auction “will take place soon, as the new service needs to be operational by November 1 next year, keeping in mind the winter season,” the ministry said.
Additionally, the Royal Decree provides for measures to reactivate thermal power plants that have stopped operating due to current gas prices. They can temporarily waive their regulated payments so that they fall within the scope of the Iberian system – the gas restriction – and receive the adjustment imposed by the combined cycle power plant.
The ministry recalled that a cogeneration plant produces heat and electricity simultaneously more efficiently than generating heat on the one hand and electricity on the other, resulting in primary energy savings of about 10%. Currently, these plants are stopped, so resuming the operation of the stopped CHP plant will result in savings, which could reach 1.2% of the daily gas demand, specifies the environmental transition.
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