The application period for the first auction called to grant the economic regime for renewable energy is now open

Written on 15 Dec 2020

On 5 December, Order TED/1161/2020, of 4 December, was published in the Official State Gazette (hereinafter, the "BOE"). This order regulates the first auctioning mechanism for granting the economic regime for renewable energies and establishes the indicative calendar for the period 2020-2025 (hereinafter, the "Order TED/1161"). This Order establishes that the auctions to be called under this system will be called by means of a resolution by the head of the State Secretariat for Energy. In this respect, the Resolution of 10 December, issued by this Secretariat, was published in the BOE on 12 December, calling the first auction for the granting of the economic regime for renewable energies under the provisions of Order TED/1161 (hereinafter, the "Resolution of the State Secretariat").

Below, we describe the most relevant aspects regulated in each of these rules.

A) Main aspects of Order TED/1161

As the title of this rule states, it was created to regulate the auctioning mechanism for granting the economic regime for renewable energies for electricity production facilities (hereinafter, the "economic regime") recently regulated by Royal Decree 960/2020, of 3 November, as well as a calendar for the allocation of the economic regime during the period 2020-2025, which includes indicative deadlines, frequency of calls for submission, expected capacity and expected technologies.

As far as the scope of the rule is concerned, it applies to facilities: (i) of electricity generation from renewable non-fossil energy sources; (ii) may consist of one or more technologies; (iii) they may be new, or extensions or modifications of an existing facility; (iv) they must result from a new investment undertaken after the auction has taken place which gives rise to the right to benefit from the economic regime; and (v) they may not have a storage system, or if they do, the storage system must be used for the exclusive storage of the energy produced by the facilities.

For the purposes of the application of the economic regime, references to the term "facility" shall be construed as references to a "remuneration unit". A remuneration unit is understood as the part of the facility for which the values required to qualify as applicable for a payment to be made under the economic regime are the same for all the elements making up that remuneration unit and different from those of another remuneration unit within the facility. In order to participate in the various markets, each remuneration unit must be constituted as a 'supply unit'. The calculation of the energy to be auctioned will be carried out by the market operator on a daily basis. The specific remuneration of each facility will be obtained from:

  • Its awarded price.
  • The remuneration parameters of the technology to which they correspond which are (i) the minimum number of equivalent operating hours per year; (ii) the maximum number of equivalent operating hours per year; and (iii) the market adjustment percentage.
  • The specific characteristics of each facility.
  • Its participation in the electricity market.

The product to be auctioned will be the installed power. The resolution calling for the auction may establish several different products for the same auction. Likewise, the resolution shall establish for each product the total volume of the product to be auctioned ("quota of product to be auctioned"). In addition, minimum reserves of the product to be awarded may be established for each quota of product aimed at different technologies or distinguishable categories.

With regard to the auction procedure, natural or legal persons who meet the requirements established in Order TED/1161 and in the resolution calling for the auction may participate. The auction mechanism shall consist of the following processes:

  • Pre-qualification process. In this process, the right to receive information related to the auction and to request qualification at a later date will be obtained.
  • Qualification process. In this process the subjects who have been pre-qualified will be enabled to participate in the auction for a certain amount of power declared by the participant, which will determine their maximum qualification volume for the product.
  • Auction process. This process will consist of several steps. Firstly, a period will be allowed for participants to submit their bids. Once it has closed, the auction management body will apply the allocation mechanisms established by the matching process. At the end of the auction, participants may file complaints. The results will be published in the BOE.

To ensure fair competition, it is stipulated that the volume of product offered must exceed the volume of product to be auctioned by at least 20%.

Likewise, it is established that the bidders will be able to make their offers with the following characteristics: (i) a different bid may be submitted for each product, technology and category distinguishable by its specifications; (ii) each bid may include up to a maximum of 100 sections and (iii) these may be defined as divisible or indivisible.

As regards the formalities and procedures associated with the electronic registration of the economic regime, these are similar to those envisaged for the last auctions held in Spain under the previous legislation. The obligation to deposit a guarantee amounting to EUR 60/kW is established, which will be returned/executed depending on whether or not certain requirements are met, such as identification of the facility, accreditation of the administrative construction permit and registration in the register in the state of operation (previously, they must have been registered in the state of pre-allocation).

Penalties are also established to encourage compliance with the obligations relating to minimum auction energy.

Finally, an indicative auctioning calendar is established for the allocation of the economic regime indicating the minimum volumes of accumulated power for the period 2020-2025 for which distinctive criteria may be established according to their characteristics. This calendar will be updated at least annually.

B) Main aspects of the State Secretariat's Resolution

As mentioned at the beginning of this publication, by means of the Resolution of the Secretariat of State, the first auction for the granting of the economic regime has been called.

It specifies the requirements for facilities to be located in the mainland electricity system, which must be new facilities or extensions of existing ones, without any other type of modification. The auction calendar was approved, with yesterday, 15 December 2020, being the opening date of the deadline for submitting the documentation for prequalification and qualification. This period will close on 19 January 2021.

The quota of product to be auctioned will be 3,000 MW of installed power, of which at least 1,000 MW must be for solar technology and another 1,000 MW for onshore wind technology. The maximum size of an indivisible section offered is set at 180 MW. The volume of product awarded to a single company or business group may not exceed 1,500 MW. Depending on the type of technology, the deadline for availability of the facility, the date of expulsion from the economic regime, the start date of the maximum delivery period and the maximum delivery period are established. In addition, the reserve price is set confidentially and the risk price is set at 0.00 euros/MWh.

On the other hand, the obligation is established to present, together with the application for registration in the register in a pre-allocation state, a strategic plan with the estimates of the impact on local employment and the industrial value chain and, together with the application for registration in an operational state, the definitive plan which must reflect the level of compliance with the forecasts made in the plan presented after the identification of the facility.

As regards the rules of the auction, they are set out in Annex I together with the forms to be completed in order to participate.