MITECO begins the processing of the Royal Decree project for renewable energy auctions

‘-The new framework allows to transfer directly to all consumers, from the domestic consumer to the industrial, the savings implied by renewable production

-Participants will bid by offering the price they are willing to charge for the energy generated by the installation

June 26, 2020- The Ministry for the Ecological Transition and the Demographic Challenge (MITECO) has opened, today June 26, the deadline for hearing and public information of the draft Royal Decree regulating the economic regime of renewable energies for electricity generation facilities. The text establishes a new framework for future renewable installations that will be granted through auctions of the energy to be delivered to the system, the installed power or a combination of both. In any case, the participants will bid by offering the price they are willing to charge for the energy generated by the installation.

The draft Royal Decree is submitted to the process of public hearing and information for 15 working days and can be consulted at this link.

The text has been developed in line with Royal Decree-Law 23/2020, on measures in the field of energy and in other areas for economic reactivation approved in the Council of Ministers of June 23. It responds to the need to offer a stable framework that attracts investment and promotes economic activity throughout the country’s renewable energy value chain in a scenario of recovery after the health crisis, and it is essential, along with other mechanisms to promote renewables, to comply with the decarbonization commitments that Spain has acquired as part of the Paris Agreement and Member State of the European Union. These commitments have been planned in the Integrated Climate Energy Plan (PNIEC) 2021-2030, which foresees the installation of around 60 GW renewables in the next decade, and the establishment of auction mechanisms such as the one regulated by this draft royal decree.

Renewable energies are not only the most sustainable energy alternative, and therefore key to achieving climate neutrality no later than 2050, but they are also the lowest cost form of electricity generation today. Spain has great renewable potential, both in wind and insolation hours, and a consolidated business fabric, with leading companies at a global level, which has mature technologies and others in very advanced development phases. The proposed auction framework will generate clear signals that will be driving the entire value chain in our country associated with renewable energies, contributing to the promotion of economic activity and employment.

Currently, the regulations allow the call for auctions of the specific remuneration regime. Participants bid for a return on investment, in addition to market revenues. In the context of wide penetration of renewables, in which the prices of certain renewable technologies may be lower than those of the market, as is expected for the next decade, it is necessary to develop a framework that offers efficient economic signals and allows the savings involved in renewable production to be transferred directly to the consumer.

AUCTIONED PRODUCT

The granting of the new remuneration framework, which the draft Royal Decree calls the Economic Regime of Renewable Energies, will be carried out through auctions that will comply with the principles of transparency, objectivity and non-discrimination. Before the holding of an auction, the quota of energy and / or maximum power that is auctioned will be established. Each auction will be held in a closed envelope and will award the auctioned product to the offers of smaller amount until reaching the established quota. The price for each successful bidder will match the price for which he bid.

In addition, on an optional basis, more demanding technical requirements may be included at the request of the System Operator, as well as discrimination by production technologies based on their technical characteristics, levels of manageability, criteria of geographical location, technological maturity, size or innovative component, among other factors. Similarly, a minimum price may be fixed which excludes reckless offers, and which may be confidential.

SMALL, DEMONSTRATION AND COMMUNITY FACILITIES

With the aim of promoting social participation in the field of renewables, as well as the promotion of innovative projects, the draft Royal Decree also allows that, in the call for the auction, additional criteria are established aimed at certain projects with specific characteristics, such as those of small size, demonstration projects and those of energy communities, can compete on a level playing field. It will also be possible to enable a process of adhesion to the result of the auction, with an award price calculated from the results, for small installations and demonstration projects, in line with the European renewable energy directive.

AUCTION PRICE AND MARKET SHARE

Once the auction is concluded, the remunerated facilities will offer their energy on the market under equal conditions, according to their best forecast and their opportunity cost.

The successful bidders will receive the price set in the auction for each unit of energy they sell in the daily or intraday market, up to the quota and the term established in it.

Alternatively, with the aim of optimizing the integration of renewables in the system and maximizing the savings for the electricity bill, it can be established that the price resulting from the auction is corrected with incentives for the participation of the successful bidder in the market, introducing some exposure of the facilities to the electricity market. With this, it can be encouraged, for example, to offer its energy at the most expensive times of the market, which allows to displace other forms of generation with higher prices. With this measure, you can also favor the installation of plants capable of moving their production at certain times, such as those that have storage. Where appropriate, this percentage of correction on the price set in the auction will be defined in each call, with a value that will always be between 0 and 0.5.

Finally, the successful bidder will charge the market price, and not the one stipulated in the auction, for the energy sold in the adjustment and balancing services. The Market Operator will settle the difference between the prices of the Daily and Intraday Market and the prices received for the energy sold by each installation, assuming an income or an economic deficit for the market according to the matching price of each installation is higher or lower than its perceived price.

It establishes the existence of penalties, to be quantified in the implementing regulations of the Royal Decree, derived from breaches associated with the energy not delivered. The level of non-compliance and, therefore, the penalty, will be linked to the volume of committed energy not delivered.

SYSTEM OF CALLS AND CALENDAR

The Royal Decree also establishes the system for calling auctions.
In the first place, and by ministerial order, the auction procedure and the characteristics of its remuneration framework will be regulated, being able to include, among other aspects, the technologies, conditions and guarantees to participate in the auction, the product to be auctioned, as well as the parameters and other elements that configure and specify the Economic Regime of Renewable Energies.

On the other hand, and in order to favor the predictability of the auctions, and also by ministerial order, a forecast of the calendar of holding auctions will be collected, which will include a minimum period of five years, will be updated annually and will be oriented to the achievement of the renewable production objectives established in the Integrated National Energy and Climate Plan.

The auctions developed under ministerial order will be convened by Resolution of the Secretary of State for Energy, which will be published in the Official State Gazette and which will detail the rules of application in each auction.

Source: MITECO