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Energy in Spain. Legal Issues – No. 5 (January 2021)
28 de Enero de 2021
On 30 December 2020, Royal Decree 1183/2020 of 29 December 2020 on access and connection to electricity transmission and distribution networks (“Royal Decree 1183/2020”) was published in the Spanish Official Gazette (BOE). Royal Decree 1183/2020 sets out the criteria and procedure in relation to applications for and the processing and granting of licences for access and connection to the electricity transmission and distribution networks by producers, transmission operators, distributors, consumers and owners of storage facilities.
On 22 January 2020, Circular 1/2021 of the Spanish National Competition and Markets Commission (CNMC) was published in the Spanish Official Gazette (BOE), which sets out the methodology and conditions for access and connection to transmission and distribution networks by electricity production facilities (“Circular 1/2021”). The scope of Circular 1/2021 is limited to the access and connection of production facilities and does not set out provisions regarding the specific treatment of distributors or consumers.
Both Royal Decree 1183/2020 and Circular 1/2021 implement Section 33 of the Spanish Electricity Sector Act (governing access and connection to networks in general) and set out new provisions regarding access and connection licences.
i.- Main developments introduced by Royal Decree 1183/2020
(·) Royal Decree 1183/2020 provides for the joint processing in a single procedure of the applications for licences to access and connect to electricity networks. The manager of the relevant network will act as a single point of contact and will be required to have an online platform for the purposes of providing information (including information relating to the access capacity existing in each node in accordance with the conditions established in Circular 1/2021), managing the applications submitted and answering any enquiries regarding their status.
(·) It removes the concept of a “node-specific single intermediary” (Interlocutor Único del Nudo or “IUN”), previously required for renewable generation facilities with shared infrastructure.
(·) It applies the time-based priority principle (in the event of competing applications for the same position) for granting access and connection licences. Priority will be determined on the basis of the date of “acceptance of the application” (which will be the “date and time of submission of the application” to the network manager). However, there are two exceptions where access and connection licences will be granted through specific procedures determined by ad hoc criteria: (i) access capacity tenders in new nodes of the transmission network / nodes in which power capacity is released or emerges; or (ii) “just transition nodes”
(·) It includes the possibility of hybridisation by the owners of generation facilities with valid access and connection licences, by incorporating electricity generation modules that use renewable primary energy sources or storage facilities (see below).
(·) It also sets out provisions regarding the updating of access and connection licences and applications, in those cases where changes are made to the facility or the project (including its hybridisation) that do not prevent the facility from still being regarded as the same facility, in accordance with the provisions of Annex II of Royal Decree 1955/2000.
(·) It retains the obligation of submitting a document showing the deposit of a financial guarantee to the body responsible for granting approval (this is a condition sine qua non for the commencement of the procedure by the network manager). Likewise, the amount of 40 €/kW installed capacity (provided for in Royal Decree 1955/2000) also remains. Such financial guarantee must expressly refer to Section 23 of Royal Decree 1183/2020 and indicate the technology, name, location and installed capacity of the project. The financial guarantee will be returned and cancelled when the operating approval is obtained, but also in the event of the rejection of an access and connection application (except when the application relates to a node with zero access capacity, in which case 20% of the guarantee will be enforced) and in the event of denial of a licence for reasons not directly or indirectly attributable to the applicant. However, the guarantee will be enforced when the access and connection licences become invalid, although the body responsible for approval of the facility may decide not to enforce the guarantee, at the request of the party concerned, if the licence has become invalid due to “a report or decision of a public authority” that prevents the construction of the facility.
(·) It amends the concept of installed capacity in the case of facilities using solar power technology. Such capacity is the smaller of either the maximum unit power capacities of the photovoltaic modules (previously this was the only criterion) or the maximum power capacity of the inverter or inverters (based on nominal capacity). The purpose of this amendment is to encourage the incorporation of double-sided modules in photovoltaic facilities, preventing it from resulting in an increase in the installed capacity.
ii.- Main developments introduced by Circular 1/2021
(·) Circular 1/2021 sets out provisions regarding the content of the access and connection applications, the access and connection procedures and the access and connection licences.
(·) It establishes a mechanism for resolving any disputes that may arise in relation to any phase of the procedure for obtaining access and connection licences and entrusts the resolution of any disputes to the CNMC (disputes regarding access to the transmission or distribution networks and disputes regarding connection to the transmission network or the distribution network under Central Government control) or the applicable body of the Regional Governments (other connection disputes).
(·) It sets outs the provisions of the network agreement regarding technical access.
(·) It includes the obligation of network managers to make detailed information available on their websites, updated on a monthly basis, regarding the capacities available at the nodes of their networks with a voltage of more than 1 kV.
(·) It establishes certain technical criteria necessary for i) assessing access capacity, ii) assessing connection viability and iii) determining the impact of the production facility on a network other than the network to which it is connected.
(·) The CNMC will approve by resolution those detailed specifications that may be necessary to implement the methodology and conditions for access and connection to the transmission and distribution networks set out in Circular 1/2021.
iii.- Moratorium on access and connection applications
The approval of Royal Decree 1183/2020 and Circular 1/2021 does not result in the lifting of the moratorium on access and connection applications imposed by Royal Decree-Law 23/2020, as the former states that, except for those tenders that may be expressly called by the Ministerio para la Transición Ecológica y el Reto Demográfico (Spanish Ministry for Ecological Transition and Demographic Challenge), no new joint applications for access and connection licences will be permitted until the network managers make public, through their web platforms, the information on access capacity available at the various nodes. Royal Decree 1183/2020 grants a period of three months for the implementation of these web platforms, and Circular 1/2021 indicates the period in which the available capacity of each node must be accessible. In any event, the available access capacity must be calculated in accordance with the detailed specifications to be approved by the CNMC.
It is important to bear in mind that although Royal Decree-Law 1183/2020 stipulates that access and connection applications will not be permitted until such time, it does not prohibit the creation of the mandatory financial guarantees (except in the case of “just transition” nodes as indicated in the Annex of Royal Decree-Law). The timely providing of guarantees may be important as it is a requirement for applying for access and connection licences and it is a deciding criterion in the event of two applications submitted on the same day and at the same time.
2.- Legal provisions governing the hybridisation of electricity generation facilities
Spanish law firmly commits to the hybridisation of electricity generation facilities as a means to (i) increasing the penetration of renewable energies and (ii) optimising access capacity to electricity transmission and distribution networks and the use of such networks, in order to achieve the objectives set by the Spanish National Integrated Energy and Climate Plan (PNIEC).
Royal Decree-Law 23/2020 amends the Spanish Electricity Sector Act in order to grant to the holders of access licences of electricity generation facilities that hybridise such facilities with electricity generation modules using renewable energy or by incorporating storage facilities, the right to deliver electricity using the same connection point and the access capacity already granted, provided that the new facility meets the applicable technical requirements.
Likewise, the amendment of the Spanish Electricity Sector Act provides for applications for new access licences of hybrid facilities, provided that at least one of the electricity generation technologies is renewable or includes storage facilities.
The Spanish Electricity Sector Act therefore provides both for the hybridisation of already existing facilities (using the connection point and access capacity of the original facility) and the development of new hybrid facilities.
The implementation of the Spanish Electricity Sector Act in this regard has been carried out by Royal Decree 1183/2020 of 29 December on access and connection to electricity transmission and distribution networks. In accordance with such Royal Decree:
a) The hybridisation of existing facilities requires the updating of access and connection licences. The hybrid facility must meet the following requirements:
- Compliance with the technical access and connection requirements established by law (in particular, in Circular 1/2021 of the CNMC).
- No increase in the access capacity to such an extent that this prevents the facility from being regarded as the same facility, in accordance with the fourteenth additional provision of Royal Decree 1955/2000.
- Compliance with the applicable technical and measurement requirements.
- Existence of a prior access and connection licence -the updated licence – for at least some electricity generation modules.
- Installed capacity of the technology granted the prior access and connection licence of no less than 40% of the total access capacity.
- Compliance with the connection requirements established in Commission Regulation (EU) 2016/631 of the new electricity generation modules.
The general procedure for obtaining new licences will apply to the updating of access and connection licences, although the deadlines of the simplified procedure will apply, the time-based priority principle will not apply and the financial guarantees of the new generation module will be reduced by 50%.
b) The general procedure will also apply to applications submitted to obtain access and connection licences for hybrid facilities, with a 50% reduction in the financial guarantees of technologies contributing less power.
c) Furthermore, the possibility is established of updating an access and connection application that is in progress, and for the purposes of the time-based priority principle, the date of the original application will be taken into account, provided that the generation facility may be regarded as the same facility in accordance with the fourteenth additional provision of Royal Decree 1955/2000.
d) Royal Decree 413/2014 of 6 June is amended, which governs the activity of electricity production using renewable energy sources, cogeneration and waste, in order to determine the hybrid facilities that may qualify under the specific remuneration scheme.
e) Royal Decree 413/2014 is also amended in order to set out provisions regarding the remuneration of hybrid facilities.
Lastly, the provisions governing the auction mechanism for allocating the new remuneration scheme for renewable energies (Royal Decree 960/2020 of 3 November and Ministerial Order TED/1161/2020 of 4 December) provide for the possibility of participation in auctions of facilities comprising more than one technology.
3.- First auction for the awarding of the renewable energy remuneration scheme
On 12 December 2020 the Resolution of 10 December 2020 of the Secretary of State for Energy was published in the Spanish Official Gazette (BOE), calling the first auction for the awarding of the renewable energy remuneration scheme (REER), in accordance with the provisions of Order TED/1161/2020 of 4 December.
i.- General considerations regarding the provisions governing the first auction mechanism to award the renewable energy remuneration scheme
Ministerial Order TED/1161/2020, which sets out provisions regarding the first auction mechanism to award the renewable energy remuneration scheme, indicates, specifically, the following:
- The remuneration parameter values of the various technologies eligible to participate in the auctions called in implementation thereof.
- The specific elements of and the adjustments necessary in the general method for selecting bids in order to adapt it to the characteristics of the invitations to participate.
- The processes that make up the auction mechanism.
- The processes and procedures relating to the REER Electronic Register.
- The mechanism to monitor the viability and maturity of the projects by means of which the capacity allocated through the competitive bid mechanism materialises.
- The penalties set forth in Section 20 of Royal Decree 960/2020, with the aim of incentivising the fulfilment of obligations in relation to the minimum auction energy acquired by the facilities awarded the REER.
- The approximate timeline of auctions for the period 2020-2025.
ii.- Specific considerations regarding the first auction to award the REER called by Resolution of 10 December 2020 of the Secretary of State for Energy
Requirements that must be met by the facilities:
Facilities that are able to participate in the auction and, where applicable, be awarded the REER, must meet the following requirements:
- They must be included in category b) of Section 2.1 of Royal Decree 413/2014.
- They must be new facilities or extensions of existing facilities (this invitation to participate does not stipulate that those parties who intend to modify existing facilities may participate).
- They must be located in the mainland electricity system.
- They must not have a storage system, or if they have a storage system, this must be used solely for the storage of the energy produced by the facility.
Capacity to be auctioned
3,000 MW, with a minimum reserve of 1,000 MW for photovoltaic technology and a further 1.000 MW for wind technology. The allocated maximum capacity will not exceed 3,180 MW.
The maximum size of an indivisible block that may be offered will be 180 MW.
The maximum capacity awarded to a company or business group may not exceed 1,500 MW.
Risk price (minimum price) and reserve price
The established risk price, i.e., the minimum price, is 0 Euros MW/h.
The reserve price, i.e., the maximum price, is confidential (it will be made known to the OMIE when bidding opens).
Timeline of the auction
The auction was held on 26 January 2020. The capacity finally awarded was 3,034 MW, which was below the market price. This will result in direct savings in electricity bills. Specifically, the auction resulted in a weighted average price of 24.47 €/MWh for photovoltaic technology and 25.31 €/MWh for wind power.
Deadlines for start-up of facilities
The table below indicates, per technology, the following:
- The availability cut-off dates of the facility (if such deadline is not met the right to be awarded the auction will not be lost, but the guarantees will be partially enforced, depending on the amount of delay).
- The cut-off dates for exclusion from the auction (if such deadline is not met the right to be awarded the auction will be lost and the guarantees will be enforced in full).
- The start date of the maximum delivery period and the maximum delivery period (during the maximum delivery period the facility must fulfil the obligation to sell the minimum auction energy, otherwise the penalties provided for in Section 19 of the Ministerial Order TED/1161/2020 will apply).
4.- Developments of Royal Decree 1106/2020 of 15 December governing the Electricity-Intensive Consumer Statute (Estatuto de los Consumidores Electrointensivos) (Royal Decree 1106/2020)
On 17 December 2020, Royal Decree 1106/2020 of 15 December, which governs the Electricity-Intensive Consumer Statute (“Royal Decree 1106/2020”), was published in the Spanish Official Gazette (BOE). Its purpose is to “maintain and/or improve the competitiveness of electricity-intensive industrial companies at European or international level”.
Both the Electricity-Intensive Consumer Statute and the compensatory support for indirect CO2 emission costs are tools intended for improving the competitiveness of large industry. Likewise, the establishing of closed electricity distribution networks (provided for in Section 3 of Royal Decree-Law 20/2018, although still to be implemented in law) or the provision of the interruptibility demand management service provided for in Ministerial Order IET/2013/2013 of 31 October (a service that is currently suspended, as the auction to select the providers has not been called either in the second half-year of 2020 or in the first half-year of 2021), may also contribute to the same objective.
The status of “electricity-intensive consumer” must be awarded for the point of supply or facility. Those wishing to obtain such status must meet the following requirements:
• Be consumers who purchase their energy on the electricity production market by any of the means established by law.
• Have used during at least two of the previous three years an annual volume of electricity of more than 1 GWh, and at the same time, for these same periods, have used in the hours corresponding to the off-peak tariff period at least 50% of the energy.
• Operate in certain business sectors or sub-sectors (indicated in the Annex of Royal Decree 1106/2020).
• Have a ratio between annual usage and the gross added value of the facility corresponding to the point of supply for which they have the status of electricity-intensive consumer, of more than 1.5 kWh/€ during at least two of the previous three years.
• Be the owner of the point of supply or facility validly created.
Status as an electricity-intensive consumer must be certified by the Dirección General de Industria y de la Pequeña y Mediana Empresa (Directorate-General for Industry and Small and Medium-Sized Companies (DGIPME). In this regard, Royal Decree 1106/2020 sets out the procedure for obtaining the certificate and maintaining it and, where applicable, regarding its loss. The certificate of electricity-intensive consumer is valid for the year for which it was requested and until the 30th of April of the following year, when it must be renewed.
In addition to being able to receive the support that is provided for in the Royal Decree, electricity-intensive consumers will have the obligations set out therein (have predictable usage, have in place energy management systems, carry out certain energy efficiency investments, draw up periodic reports, purchase part of their usage through forward contracts for electricity produced with renewable energies and continue carrying on their business for a period of three years from the time that the support is granted).
Lastly, Royal Decree 1106/2020 sets out provisions governing the mechanism of hedging on behalf of the Government, through the management agent (CESCE, S.A.), of the risks arising from the purchase in the medium and long term of electricity by electricity-intensive consumers.
5.- Requests for expressions of interest in order to receive proposals in the energy sector with a view to the preparation of the Spanish National Reforms and Investments Plan 2021-2023
The Ministerio para la Transición Ecológica y el Reto Demográfico has issued various requests for expressions of interest in order to receive proposals with a view to the preparation of the Spanish National Reforms and Investments Plan 2021-2023 that Spain must submit to the European Commission before 30 April 2021 in order to be able to receive funds from the Next Generation EU Recovery and Resilience Plan.
Such requests for expressions of interest include, in particular, those relating to the “promotion of sustainable energy on the islands” (until 26 February 2021), to “electric mobility” (until 29 January 2021) or to “renewable hydrogen” (already concluded).
6.- Requirements for the development of renewable energy generation projects in Spain
Energy prices have risen sharply at the start of 2021, due, among other circumstances, to the drop in wind power production, the fall in solar power production and the adverse weather conditions during January.
The increase in prices on the gas market is also contributing to the above situation.
This situation comes after wholesale electricity prices fell in 2020 to levels not seen for over 15 years. The average price of electricity on the daily market was 33.96 €/MWh in 2020, compared with 47.68 €/MWh in the previous year.
In addition, the Government has begun the process for approving the preliminary draft of the Law for the creation of the National Fund for the Sustainability of the Electricity System (FNSSE). By means of this mechanism, the Government intends to remove from the energy bill the regulated remuneration for electricity production using renewable technology, in order to reduce electricity bills by 13%.
The draft text provides for the creation of a fund that will finance the associated costs of the specific remuneration scheme of renewable energies, cogeneration and waste, largely fixed costs, which will cease to form part of electricity bills.
Traders of all energy sectors will be required to finance the fund -unlike as occurs in the current system, in which the contribution falls directly to the end consumers -, who will contribute to the fund on the basis of their sales. In order to ensure the fairness of the system and redistribution, exemptions and compensations will exist for those sectors with less capacity to adapt and respond to the new system.
In addition, the fund may be supplemented with other financial resources from EU funds and other items allocated in the General State Budgets.
The draft text establishes a timeframe of 5 years until the full implementation of the fund, which will allow the application of the new framework to be carried out gradually and in a linear fashion in order to enable the adaptation of all stakeholders involved.
