On 6 December 2020, the Official State Gazette has published (and it has immediately entered into force) the Ministerial Order that (i) regulates the first auction mechanism to grant the economic regime for renewable energies and (ii) establishes an indicative timetable for the allocation of the Economic Regime for Renewable Energy (“ERRE”) over the period 2020-2025.

This legal text develops a Royal Decree approved by the government last 3 November, which in turn regulated the ERRE for generation facilities of electrical energy from renewable energy sources (“Auction RD”).

However, please note that the renewable auctions will actually have to be convened by means of a Resolution issued by the Secretary of State for Energy (SEE) and published in the Official State Gazette.

The Ministerial Order does regulate several aspects of the auctions’ mechanism:

1). As stated by the Auction RD, the facilities must be the result of a new investment undertaken after de auction either because it is a new facility in its entirety or an extension or modification of an existing facility (in this case, the ERRE will only apply to the energy which is attributable to that extension or modification).

Regarding modifications (i) a period of at least 15 years must have elapsed from the date of definitive registration in the Administrative Register of Electricity Production Installations until the resolution issued by the SSE convening the auction and (ii) the modification must be considered significant in the terms still to be determined in the Resolution issued by the SSE.

2). The specific remuneration of each installation receiving the ERRE will be calculated based on (i) its awarding price, (ii) the remuneration parameters of the technology depending on the characteristics of each installation and (iii) its participation in the energy market.

3). To participate in the auction, the following requirements apply: (i) deposit of a EUR 60/ kW financial guarantee before the managing entity (OMIE), which will be cancelled (not enforced) if the bid is withdrawn before the auction, and (ii) payment of a fee of EUR 0.08/kW based on the capacity for which participants are bidding.

4). The milestones of the auction mechanism are (i) prequalification, (ii) qualification, (iii) auction, (iv) publication of provisional results after the auction matching process (proceso de casación), (v) publication of definitive results, and (vi) validation of results by the supervising entity (CNMC).

5). Bidders may submit a different offer for each product and one or more technologies, distinguishable by their specificities, pursuant to the conditions still to be determined in the Resolution from the SEE convening the auction.

Offers can be divided into a maximum of 100 different divisible and indivisible slots.

The total offered capacity must be at least 20% of the pre-defined demand for the auction, to be deemed competitive.

Offers above the price of reserve and below the risk price will be rejected.

6). Pursuant to the Auction RD, awardees shall be registered under pre-allocation status and once facilities begin selling energy to the market, they will be changed to in operation status. To this end, Ministerial Order states that:

  • Pre-allocation status requires (i) the deposit of the EUR 60/kW guarantee, covering the total installed capacity being registered and (ii) to present the evidencing receipt at the General Directorate for Energy Policy and Mines (DGPEM). Registration must be requested within 2 months since the publication of the SEE’s Resolution of the auction in the Official State Gazette.
  • Pre-allocated title holders will need to identify their installation within 6 months from the publication of the auction awardees in the Official State Gazette.
  • Within 12 months from the publication of an auction awardee, pre-allocated title holders will need to present evidence of the facility installation, detailing the connection point to the transmission or distribution grid.

7). Furthermore, to promote compliance with this regime, the Ministerial Order regulates penalties (5 euros/MWh) in the following cases:

  • Failing to meet minimum generation requirements at the subsequent 3-year milestones.
  • Cancelling participation in the auction before meeting minimum generation requirements.
  • Not meeting minimum generation requirements before the end of the contracted maximum delivery date.

Rocío Gros
Lawyer