Spain: New measures for the electricity sector in Royal Decree-Law 8/2023

On December 28, 2023, the Official State Gazette published Royal Decree-Law 8/2023 of December 27, 2023, adopting measures to confront the economic and social consequences of the conflicts in Ukraine and the Middle East, as well as to mitigate the effects of the drought (Royal Decree-Law 8/2023). This has been ratified by Congress of Deputies on 10 January 2024.

Royal Decree-Law 8/2023 introduces significant new measures for the electricity sector in the context of the packages of measures approved originally with the aim of confronting the consequences in Spain of the war in Ukraine. Notably, we can highlight the following significant new provisions:

• Exceptional extension of the administrative milestones in Royal Decree-Law 23/2020
       
  Royal Decree-Law 23/2020 of June 23, 2020, approving energy measures and measures in other fields to reactivate the economy (Royal Decree-Law 23/2020) introduced the obligation for renewable energy plants to meet certain administrative milestones to maintain in force the access and connection permits to the transmission and electricity grids.
        
  Under article 185 of Royal Decree-Law 5/2023 of June 28, 2023, the maximum time period for evidencing the milestone relating to the administrative building permit for plants that obtained access permits between December 31, 2017 and June 30, 2023 was set at 43 months.
        
  Through Royal Decree-Law 8/2023, a new extension is granted for a further six-month period (that is, up to 49 months) for evidencing fulfillment of this milestone for generation plants obtained an access and connection permit between December 31, 2017 and the entry into force of this royal decree-law, on December 29, 2023.
           
  Additionally, it provides that developers who obtained access and connection permits in the period mentioned above and who want to extend the time period for obtaining the final administrative operating permit for up to eight years may do so, subject to the following conditions:

  • The extension must be applied for within three months from the entry into force of Royal Decree-Law 8/2023 or from the date the administrative building permit was obtained, if later.

  • The application must expressly include the six month period in the calendar year in which the plant will obtain the administrative operating permit, which must in all cases be within the specified maximum eight-year period.

  • The Government will have to deliver a decision within six months and failure to deliver a decision will have the effect of rejecting the application.

  • The determination of this new time period means that the activity cannot be brought into operation before the beginning of the stated six-month period.

  Moreover, it provides that, in cases where the managers of the transmission and distribution grids have not obtained a final administrative operating permit for the positions of the substation to which the generation plants are connected, the milestone relating to the administrative operating permit for the renewable energy plant will be deemed met upon obtaining the provisional operating permit for tests. This is contingent on the permit including both the generation plant and the evacuation infrastructure up to at least the last 100 meters before the transmission or distribution substation where its connection point is located.
            
  Lastly, it amends article 1.1 of Royal Decree-Law 23/2020, to determine a maximum total nine-year time period for administrative process relating to electricity power plants using hydraulic pumping technology and those using offshore wind technology.

• Extension of the capacity reservation at nodes subject to competitive bidding processes for large self-supply plants
  
  Article 8 of Royal Decree-Law 6/2022 of March 29, 2022 released 10% of the access capacity at transmission grid nodes reserved for competitive bidding processes before its entry into force, for it to be granted on a first come first served basis to plants associated with a self-supply arrangement and meeting certain requirements.
             
  Through Royal Decree-Law 8/2023, this measure has also been made applicable to all transmission grid nodes that were reserved for competitive bidding processes since the entry into force of the above-mentioned Royal Decree-Law 6/2022, as well as for any that are reserved in the future for competitive bidding processes taking place after its entry into force.

• Rules on the access and connection process for new large consumers
           
  Due to the increase in requests for access to the grids to connect new supplies to consumers (hydrogen production plants, data processing centers and storage infrastructure), Royal Decree 1183/2020 of December 29, 2020 on access and connection to electricity transmission and distribution grids has been amended to include provisions on demand access permits.
  
  Among other elements, it states that to apply for access and connection, a financial security must be provided - except for demand facilities with connection points at voltages below 36 kV- for an amount equivalent to €40 per kW requested or, in the case of storage facilities, €20 per kW requested. The financial security aims to secure the supply to a specific consumer and it will be cancelled when the applicant executes an access contract for a purchased capacity in period P1 of at least 50 % of the access capacity granted. It also sets out that access and connection permits will expire if, within a five-year time period from their obtention, a technical access contract is not signed for a capacity equal to, at least, 50% of the access capacity of the permit.
          
  Additionally, it lays down the need to call competitive bidding processes for access to demand at transmission grid nodes meeting certain requirements, which will be defined by ministerial order. In these competitive bidding processes, the asset to be granted will be access capacity for consumer supply. Timing factors such as supply starts, flexible supply and demand management undertakings, increasing energy efficiency, socio-economic, environmental and territorial impact, production chains, technical and financial solvency, investment volume, and greenhouse gas emissions avoided by the project will have to be taken into account for granting the access capacity.

• Remuneration of cogeneration and waste treatment
        
  Even though a new methodology is being prepared for reviewing remuneration for the operation of standard plants whose operating costs depend essentially on fuel prices, with the aim to provide certainty, Royal Decree-Law 8/2023 includes provisions relating to the elements to be considered for calculating the review of remuneration for the operation starting on January 1, 2024, such as, among others, an estimate of gas and electricity prices on wholesale markets.

• Extension of the term of limited operational notifications
       
  On February 2, 2024, the 18 month extension ends for electricity generation modules that have a Limited Operational Notification (LON), granted under transitional provision one of Royal Decree 647/2020 of July 7, 2020, to be able to obtain a Final Operational Notification (FON). The associated consequence is the removal of the final registration of the plant on the administrative register of electricity production plants or on the self-supply register. In view of the fact that industry associations and REE have warned of the difficulty to meet this time period, it has been extended by 8 months, until October 2, 2024 for obtaining the FON. In addition, small generation plants (type A) that obtained the LON and are registered on the relevant register will no longer be required to obtain a FON. In any event, starting on February 2, 2024 no new Limited Operational Notifications may be issued.

• Amendment of the criteria for remuneration auctions
        
  The Electricity Sector Law (Law 24/2013 of December 26, 2013) has been amended in relation to the remuneration regime to be obtained in competitive bidding processes under article 14.7 of that law. The amendment specifies that in auctions to grant the Renewable Energy Economic Regime, in addition to the criterion for awarding the energy related to the remuneration price, other non-economic criteria may be included with a weighting percentage up to 30%, such as contribution to resilience, to environmental sustainability, to innovation, to the socio-economic impact of the project or other factors enhancing the integration of renewable energy in the electricity system.

• Measures targeted at promoting reversible hydroelectric power plants
          
  The water legislation has been amended to promote the development of reversible hydroelectric power plants. A new use of water has been introduced, referred to as hydraulic power storage, which will include concessions for reversible power plants granted before the entry into force of Royal Decree-Law 8/2023, and it has been given priority over other industrial uses, including those related to the production of electricity.
            
  It moreover provides that the owners of existing reversible hydroelectric power plants who intend to repower them may obtain, once only, a new concession with the same use and purpose for a sufficient time period to recoup the investment made, which cannot be longer than 50 years.

Under final provision thirteen, Royal Decree-Law 8/2023 will come into force, regarding the amendments mentioned above, on the day following its publication date in the Official State Gazette, namely, December 29, 2023.