<article><p class="lead">Electricity net transfer capacity (NTC) between Spain and France for June has been forecast at the lowest for any month since mid-2016, just as the Spanish price discount to the French wholesale power market is expected to widen sharply with the implementation of the gas price cap on Iberian power generation.</p><p>NTC for the Spain-France direction is forecast at an average of 1.05GW in June, down from 1.37GW in May and the lowest for any month since May 2016's 962MW, according to Spanish grid operator REE. The NTC forecast for the opposite direction is 1.81GW, down from 2.43GW in May and the lowest since August 2019's 1.23GW.</p><p>The Jao cross-border capacity (CBC) auction for June delivery opened today with the lowest Spain-France volume since 2019. Only 225MW is on offer between Spain and France next month, down from 745MW for May this year and 420MW for June 2021 and the lowest for that direction since September 2019's 210MW. In the France-Spain direction, 585MW is on offer for June, down from 1.345GW for May this year and 1.052GW for June 2021.</p><p>The lower volumes come amid maintenance on some cables between the two countries. Data from French grid operator RTE show work started this week on the internal French line between Cantegrit and Argia — part of the Cantegrit-Argia-Hernani interconnector — and is scheduled to last until 5 August. And work has been going on since January on the Vic-Baixas link — this is scheduled to end on 3 October.</p><p>Spain and Portugal last week approved legislation putting in place a cap on the gas cost that combined-cycle gas turbines (CCGTs) internalise in their offers on the Iberian day-ahead and intra-day wholesale electricity markets. Under the mechanism, a formula will be applied setting a €40/MWh cap on the implied gas cost used in power price bidding on Iberian exchange Omie for the first six months. The cap will increase by €5/MWh every month over the following six months to a maximum of €70/MWh in the final month. This would yield an average of €48.80/MWh during the full year of implementation.</p><p>The cap will lead to lower marginal prices, as CCGTs have been setting prices during a significant number of hours in the Omie day-ahead pool in recent months — either directly or <a href="https://direct.argusmedia.com/newsandanalysis/article/2163328">indirectly, through hydro plants offering at prices close to CCGT levels</a>.</p><p>Representatives of the Spanish environment and energy minister admitted last week that the gas cap mechanism will have <a href="https://direct.argusmedia.com/newsandanalysis/article/2331351">the "collateral effect" of higher power exports to France</a>, which in turn could further support Iberian gas-fired generation. Stronger exports would, however, lead to higher cross-border revenues. Such revenues are split equally by Spain and Portugal and used to reduce the regulated cost of their electricity systems, but the European Commission has agreed that these revenues can be used instead to offset losses incurred by consumers as a result of the gas cap, the representatives said.</p><p>The lower NTC for June and probably July could limit cross-border revenues during the first few months of the gas cap mechanism. The Spanish June power contract's discount to the equivalent French base-load product has averaged nearly €69/MWh since 13 May, when the cap was approved, while the July discount has averaged just over €94/MWh, <i>Argus</i> data show.</p><p class="bylines">By Juan Weik</p></article>
