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#SomosRyC
Energy in Spain. Legal Issues – No. 4 (October 2020)
29 de October de 2020
Spanish Hydrogen Roadmap
On 7 October 2020 the Spanish Government approved the document Hydrogen Roadmap: A Commitment to Renewable Hydrogen, which will be key to enabling Spain to achieve climate neutrality before 2050. The Hydrogen Roadmap (HR) aims to identify the challenges and opportunities for the full development of renewable hydrogen in Spain. It sets out a number of measures that seek to boost investment action, taking advantage of the EU consensus on the role that this energy vector should play in the context of “green recovery”. The Roadmap is aligned with the 2021 Annual Sustainable Growth Strategy published by the European Commission.
The measures set out in the HR include in particular the following:
- Establishing a renewable hydrogen Guarantee of Origin system.
- Promoting renewable hydrogen through taxation.
- Implementing plans providing incentives for the purchase of vehicles and the creation of infrastructure (tax breaks, innovative public procurement and captive fleets of police vehicles, buses and taxis, etc.).
- Implementing specific legislation applicable to hydrogen stations, giving them the same treatment as traditional service stations from the perspective of land (so that they can use existing stations).
- Establishing measures for the development of national hydrogen refuelling port infrastructure.
- Creating a legal basis for Power-to-X power plants and electrolysis facilities.
- Clarifying the legal and operational framework for electrolysers to participate in the adjustment services needed to ensure a sufficient supply of electricity.
- Increasing flexibility in the use of green hydrogen in power generation and combined heat and power plant engines.
- Reviewing technical, regulatory and quality aspects in relation to the gases required for the injection and use of hydrogen in the natural gas network, focusing in particular on the use of certain existing facilities for the transport and/or storage of renewable hydrogen.
The HR provides a Vision for 2030 and 2050, setting ambitious country targets in 2030 with the aim of contributing to the achievement of the objectives set out in the National Integrated Energy and Climate Plan.
Vision 2030 foresees an installed capacity of 4 GW electrolysers and a number of milestones for the industrial, mobility and electricity sectors.
The HR will be updated every three years on the basis of the progress made towards achieving the Vision 2030 objectives, the degree of implementation of the measures and an assessment of their impact and technological developments/market evolution.
Provisions introduced by the regional governments to adapt to RDL 23/2020 and/or to improve power plant authorisations processing
Royal Decree-law 23/2020 (RDL 23/2020) introduced various measures in relation to access and connection to the electricity transmission and distribution grids. It also streamlined the processing of power plant authorisations, in particular in the case of non-substantial changes.
In this regard, some regional governments have recently adapted their legislation (applicable to power generation facilities of less than 50 MW). We summarise below some of the main recent developments:
- Comunidad Valenciana. Decree-Law 14/2020 of 7 August simplifies and streamlines the administrative procedures for the construction and start-up of solar and wind power facilities and establishes a specific single and coordinated administrative procedure for authorising the construction of solar and wind power facilities on non-development land, reducing the red tape of procedures and reducing to 10 months from permission to proceed the maximum period available to the decision-making body for settling proceedings. This Decree-Law establishes an expiry period for facilities of a maximum of 30 years when their construction on non-development land has been authorised, notwithstanding possible justified extensions. The Decree-Law prohibits the transfer of granted authorisations until the plant has obtained authorisation to operate. The obligation is established to dismantle the facilities and to guarantee such dismantling operation (the amount of the financial guarantee shall be the cost of the dismantling operation, determined on the basis of a 30-year period, and may not be less than 5% of the material budget for executing the technical project). Lastly, a municipal development fee is established for the use of non-development land of 2% of the estimated cost of the works necessary for the construction of the electricity plant.
- Castilla y León. Decree-Law 4/2020 of 18 June sets out various measures that remove administrative procedures and reduce time limits and requires solar power plants with a nominal capacity of 10 MW or more to carry out a simplified environmental impact assessment. It also simplifies the provisions governing the authorisation of wind power facilities.
- Andalucía. Decree-Law 2/2020 of 9 March amends Decree-Law 2/2018 of 26 June on the simplification of provisions in relation to energy and the development of renewable energies in Andalucía, providing that projects for electric power production facilities using renewable energy sources that do not qualify under specific remuneration arrangements and that have the necessary elements for the actual construction of such infrastructures will be promoted on a preferential and urgent basis (project maturity criterion). With a view to accelerating the construction on non-development land of certain energy infrastructures, it is established that in the procedure for authorising the works, the administrative body responsible for granting authorisation will request a development compatibility report from the city councils in whose municipality it is intended to build the infrastructure, who shall issue such report within a period of one month, removing the power of the Regional Government of Andalucía to issue such report and removing the approval of Special Plans or Works Projects.
- Cataluña. Decree-Law 16/2019 of 26 November i) adopts urgent measures to counter the existing climate emergency by means of an energy transition that enables the achievement in the shortest period of time of the objectives established in the Climate Change Act 16/2017 of Cataluña of 1 August, ii) amends the Land Planning Act, as amended, approved by Legislative Decree 1/2010 of 3 August, to facilitate and simplify the process for the construction of facilities for the harnessing of solar and wind power, and iii) sets out the conditions for authorising solar and wind power production facilities, establishing the energy, environmental, land planning and landscape requirements that must govern their construction, and simplifying the applicable administrative procedure for their authorisation. To ensure fulfilment of the obligation to restore the land to its original condition when ceasing its activities, the developer of the solar or wind power facility must provide a sufficient financial guarantee, taking into consideration the actual cost of dismantling the facility, to the applicable planning department (the amount of such guarantee and the time period in which it must be provided will be indicated in the decision that approves the relevant specific works project, and until the guarantee has been provided no specific works project may go ahead). The prior administrative authorisation for construction may only be transferred if the construction of the solar or wind power facility is completed in full and the facility has a final certificate of start-up, and the acquiring party meets the relevant requirements and provides a new guarantee of restoration of the land to its original condition to replace the guarantee previously provided by the transferring party.
- Navarra. Decree 56/2019 of 8 May of the Regional Government of Navarra sets out new provisions in relation to the administrative procedures applicable to wind farms located in the Autonomous Region of Navarra, with the aim of ensuring the functionality of the process, the simplification of procedures and the legal certainty of the developers of these facilities.
Draft royal decree and circular of the Spanish National Markets and Competition Commission (CNMC) in relation to access and connection
The eighth final provision of RDL 23/2020 contains a clear mandate for implementation of Section 33 of the Spanish Electricity Sector Act, which constitutes one of the most important pending issues for our energy legislation: the Government and the National Markets and Competition Commission (CNMC) have three months from the entry into force of the Royal Decree-Law to approve any provisions that are required for the implementation and enforcement of the provisions of Section 33.
Such time period of three months expired on the 25th of September and therefore such mandate has not been carried out in accordance with its terms (which is common in relation to this type of clauses regarding the implementation of legislation), although the provisions are soon to be approved.
Draft royal decree. It has gone through the administrative stage and is likely to be approved at one of the next meetings of the Council of Ministers. The content of the draft royal decree may be broadly summarised as follows:
- The general rule for granting rights is time-based priority, with a few exceptions: access and connection has been awarded in an auction; the requesting parties are developers with expired permits or who have waived their rights pursuant to RDL 23/2020.
- Exemptions are established for own consumption and time periods and procedures are reduced for hybridization and small facilities.
- Storage facilities that are able to deliver energy to the grid are treated for these purposes as generation facilities.
Draft circular of the CNMC. The new period of public consultation for this draft circular (brought about by the need to adapt to RDL 23/2020) concluded on the 8th of October. The administrative stage for its approval will soon conclude. The most relevant aspects of the draft circular are as follows:
- Simplification and specification of administrative procedures: permits for access and connection are processed together and with one single representative. In line with the draft royal decree, an abbreviated procedure is envisaged.
- Transparency and disclosure of information: the obligation is established to disclose and update information regarding the node capacities of the transmission and distribution grids.
- Updating of technical requirements in access capacity and connection viability: such requirements are changed in order to adapt them to the current state of technology.
Developments in investment arbitration proceedings against Spain in relation to the potential infringement of the Energy Charter Treaty due to the alteration of the 2007 remuneration arrangements for renewable generation.
The strategy used by the Spanish Government to (i) avoid new investment arbitration proceedings against Spain due to potential breaches of the obligations assumed under the Energy Charter Treaty (as a result of the alteration of the remuneration arrangements for renewable energy generation activities), (ii) terminate existing proceedings or (iii) waive the enforcement of awards made to foreign investors, has been successful and some of the existing proceedings have been terminated over the past few months.
The strategy involves recognising the right of power generation facilities using renewable energy sources, cogeneration or waste, and granted premium remuneration arrangements before the entry into force of Royal Decree-Law 9/2013 of 12 July (amending the remuneration arrangements), to enjoy a higher reasonable return (7.398%) during the two consecutive regulatory periods commencing on 1 January 2020 (i.e., 2020-2031) in the event of (i) early termination of the arbitral proceedings and effective waiver of their commencement or continuation, or (ii) waiver of any compensation or indemnity recognised as a result of such proceedings. These exceptional arrangements will remain in force until December 2020 (as the initial time limit, 30 September 2020, was affected by the suspension of the administrative time limits ordered by Royal Decree 463/2020 of 14 March, which declared a state of emergency in Spain in order to manage the health crisis caused by COVID-19).
The fact that some recent investment arbitration awards have been favourable to Spain or have recognised reduced compensation for investors, as well as the difficulty of enforcing favourable awards, may have contributed to the termination of such proceedings.
Requirements for the development of renewable energy generation projects in Spain
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ENERGY PRICES
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Daily |
Q4 2020 |
2021 |
| Futures prices 21 June (EUR/MWh) |
32.85 |
43 |
42.85 |
| Futures prices 24 July (EUR/MWh) |
34.83 |
40.46 |
44.00 |
| Futures prices 20 October (EUR/MWh) |
36.03 |
44.25 (Q1 2021) |
44.63 |
(source: www.meff.es)
An improvement in energy prices may be seen for 2021. The performance of energy prices will depend on the fall in demand for electricity, depending on whether or not new mobility restrictions are put in place to deal with the Covid-19 pandemic.
As for projects under development, RDL 23/2020 has introduced a number of new requirements both for obtaining access and connection permits and in relation to the time limits for obtaining the necessary authorizations. By the 25th of September, the developers could withdraw the guarantees provided to the authorities. Although no statistics have been published, a significant number of MWs with access and connection permits may have been withdrawn. Therefore, some of the less efficient and/or advanced projects should have been excluded from the market.
As for project financing, although some financial institutions are still committed to financing projects where remuneration depends only on the price of energy (merchant), doubts about the price of future electricity may lead to some changes in this approach.
PPAs in place will be key to obtaining proper financing for these projects. Likewise, the development of energy futures as an alternative to PPAs should help to structure the financing of such merchant projects.
As an alternative, new players (from an equity, project bonds and direct lending approach) should replace the lack of traditional project finance structures.
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