Access and connection rights, auctions and new agents on the renewable’s energy production process: Electricity storage, hybridization, independent aggregators, renewable energy communities, charging infrastructures – new regulations for renewable energy projects in Spain.
On 24 June, Royal Decree Law 23/2020 of 23 June, approving measures on energy and other areas for the economic relaunch (“RDL 23/2020”) amongst others for the promotion of the renewable’s projects and also for the new auction rules entered into forced. For this implementation, and with regard to the new auctions and also with regard to the new economic regime, on 25 June the draft of the Royal Decree regulating the economic regime of renewable energies for electricity production facilities (“Draft Royal Decree”) entered in a public consultation phase. As a result, new auctions for renewable energy are expected to be held in the autumn of this year. RDL 23/2020 and Draft Royal Decree constitute relevant innovation for the renewable energies’ development1in Spain in the following significant aspects:
Access and connection right
RDL 23/2020 includes innovations 2 with regard to the access and connection right which can be summarized in two key principles:
- access and connection rights depend exclusively on technical viability reasons and
- access and connection requests are associated with real, mature and specific projects. This try to limit the current overload of access and connection requests, submitted mainly due to speculative reasons.
Based on these principles, RDL 23/2020 stablishes different milestones for obtaining other required permits, with different deadlines according to the following rules:
a) Group 1 if the access right was obtained between 28 December 2013 and 31 December 2017,
b) Group 2 if the access right was obtained between 31 December 2017 and 24 June 2020
c) Group 3 if the access right is obtained after 24 June 2020
If these milestones are not reached, the permits will be considered expired with the consequence of the execution of the guarantees. In addition to these, RDL 23/2020 includes the following measures with regard to the access and connection rights:
- Introduces a moratorium on new access permits, with exceptions, until the regulatory framework for access and connection is developed. As a result, no new applications will be admitted regarding the access capacity that may exist at the entry into force of this Royal Decree-Law or that may be subsequently released as a result of expiry, renunciation or any other circumstance.
- Determines the criterias to consider unchanged those facilities that, for the purpose of access and connection permits, are in the same geographic location, has a coincidence access capacity and has also the same generation technology.
The process to obtain authorisations is simplified. RDL 23/2020 modifies the regulation in order to simplify the procedures for the construction, extension, modification and operation authorisation of the producer’s transport and distribution projects:
- update the administrative authorisations required to construct, extend, modify and operate the renewables facilities,
- modifies the time limits for the phases of the public information, the conformity or opposition process and the establishment of the technical condition,
- improve the phase of public information on the application for recognition of public utility,
- extend to 30 days the period for processing public information on applications for administrative authorisations for the construction, extension or modification of facilities.
Renewable energy auctions and new Economic Regime
RDL 23/2020 and the Draft Royal Decree introduce a new renewable energy auction regime that implies a new remuneration framework, that will be applicable in addition (and alternatively) to the existing specific remuneration regime.
This new remuneration framework will be based on the long-term recognition of a fixed price for energy, which will be granted through competitive tendering procedures. In these procedures, the product to be auctioned will be (i) electrical energy (ii) installed capacity (iii) or a combination of both and the variable on which it is offered will be the energy remuneration price. The purpose of this alternative framework is to favour predictability and stability in income and the financing of new renewables production facilities.
RDL 23/2020 also regulates that the procedures of competitive concurrence may differentiate technologies of production in accordance with their technical characteristics, size, manageability criteria, location, technological maturity and other factors that guarantee the transition to a decarbonized economy, as well as other particularities that ensure competitive equality.
Based on the new remuneration framework included in the RDL 23/2020 and for its draft Royal Decree determines the rules for the auctions and also a new Economic Regime of Renewable Energies (“new Economic Regime”), The new Economic Regime tray to transfer is the reduction of costs from the technological advances in renewable facilities to the consumers. New Economic Regime is composed by the following main characteristics:
- In the auctions, bids shall be made for the price of the electrical energy, expressed in €/MWh, and the product to be auctioned shall be awarded by applying a pay-per-bid mechanism. Each successful bid implies that the awarded price will be coincides with its bid price.
- The price received by the producers under the new Economic Regime for each negotiation period, per unit of energy sold in the daily and intraday markets, will be calculated from the auction price.
- In those negotiation periods in the that the price on these markets is less than the exemption price of collection established in the call of the auction, the price received will be the result of the matching of two markets. exemption price of collection means the daily and intraday market price above which the energy is accounted for and remunerated at its award price, or by contrast, for market values equal to or less than that price, energy is not counted as auction energy and is remunerated at the market price.
- Alternatively, it can be established that the price resulting from the auction will be corrected with incentives for the successful bidder to participate in the market, introducing a certain exposure of the renewable facilities to the electricity market. In this way, the aim is to optimise the integration of renewable energies into the system and maximise savings for the electricity bill.
- Additionally, the price received by the renewable’s producers under the new Economic Regime for its participation in markets other than the daily and intraday market will be directly derived from their participation in those market (mainly markets for balancing and adjustment services).
According to the Draft Royal Decree, in order to ensure the predictability of the auctions, a regulation shall be published containing a forecast of the auction calendar. The calendar shall include a minimum period of five years, shall be updated annually and shall be aimed at achieving the renewable production objectives established in the Integrated National Energy and Climate Plan.
New agents on the renewable production business
RDL 23/2020 includes regulation of new energy businesses developed in the last years:
Electricity storage. The RDL 23/2020 incorporates as a new agent of the system, the “holders of storage facilities”, facilities that allow to defer the final use of electricity to a later moment than when the energy was generated (this is achieved through battery technology) or to carry out the conversion of electrical energy into a form of energy that can be stored for the subsequent reconversion of such energy into electrical energy (the example would be the pumping technology).
RDL 23/2020 also establishes that the owners of storage facilities (and consumers) may participate in the services included in the production or demand management market.
Hybridization. RDL 23/2020 empowers holders of access and connection permits of renewable facilities “hybridize” by incorporating other renewable or storage technologies to use the connection and the access capacity granted. The purpose is to optimize the use of the existing access capacity and minimize the environmental impact.
Independent aggregators. Independent aggregators are incorporated as a new agent in the system. Independent aggregators will participate in the electricity production market, by combining multiple consumption or electricity generated from consumers, producers or storage facilities for sale or purchase in the production market.
Renewable energy communities. Renewable energy communities are included as a new agent of the system. Such communities shall be legal entities based on open and voluntary participation and controlled by partners or members that are located in the proximity of renewable energy projects owned and developed by such legal entities, whose partners or members are natural persons, SMEs or local authorities, including municipalities, and whose primary purpose is to provide environmental, economic or social benefits to their partners or members or to the local areas where they operate, rather than financial gain.
Charging infrastructures. In order to facilitate the deployment of a sufficient network of high power recharging stations (over 250 kW), RDL 23/2020 grants the declaration of public utility to these recharging infrastructures. This measure, which has been repeatedly requested by the electric automotive sector, is motivated by the need to build medium or long electric lines to supply the recharging points of intercity roads.
1 RDL 23/2020 and Draft of Royal Decree will coexist with the Law on Climate Change and Energy Transition, which is currently at in an advanced stage for its approval and with the regulation of renewable energies currently in force, which is mainly made up of (i) Law 24/2013, of 26 December, on the Electricity Sector (ii) Royal Decree 413/2014, of 6 June, which regulates the activity of electricity production from renewable energy sources, cogeneration and waste (iii) Royal Decree 244/2019, of 5 April, which regulates the administrative, technical and economic conditions for the self-consumption of electricity.
2 The access and connection regulation included in RDL 23/2020, will be developed by the new access and connection regime that is currently being drafted, to replace the one in force
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About the author – Juan Martínez Calvo is a partner of the Simmons & Simmons’ Madrid office, whose practice is focused on the energy and infrastructure sectors, advising funds, developers, contractors, lenders and public bodies. Juan has worked on a wide range of energy and infrastructure M&A transactions, as well as project finance, PPP projects and related litigation, joint ventures, asset acquisitions, privatisations, construction contracts and regulatory work. He regularly speaks at conferences in the energy and infrastructure sectors and has directed an infrastructure specialization programme at IE. Juan’s articles on his areas of specialisation have been published in several prestigious academic journals.
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