Energy Spain Newsflash 4212022 24826 PM

EXTRAORDINARY ENERGY MEASURES TO DEAL WITH THE ECONOMIC AND SOCIAL CONSEQUENCES OF THE WAR IN UKRAINE (2/2)

 On 30 March 2022, Royal Decree-Law 6/2022, of 29 March, adopting urgent measures within the framework of the National Response Plan to the economic and social consequences of the war in Ukraine (RDL 6/2022), was published in the Official State Gazette (BOE). RDL 6/2022 came into force on 31 March 2022 and introduces several measures in the fields of energy, transport, business as well as for workers and vulnerable groups, among others.

As a continuation of our first delivery on RDL 6/2022 (English version here), in this second part we summarise some additional energy measures included in the aforementioned Royal Decree-Law.

Measures relating to the electricity sector

New obligations relating to the annual investment plans of electricity distribution companies.

RDL 6/2022 imposes an exceptional obligation on electricity distribution companies by virtue of which, during the triennium comprised between 2023-2025 they must include (and clearly identify) in their investment plans, actions aimed at increasing the existing capacity of their distribution grid in order to allow the evacuation of energy from both renewable energy and self-consumption facilities.

The abovementioned actions must (i) amount for, at least, 10 per cent of the investment volume which is eligible for remuneration by the system (remuneración con cargo al sistema) of each investment plan; and (ii) prioritise those areas where the lack of access capacity for renewable energies and self-consumption facilities has become recurrently evident. As an exception for the year 2022, deadline for submitting investment plans is extended until 30 June 2022.

Temporary suspension of the granting of access permits.

Following the approval by the Spanish Council of Ministers of 2021-2026 transmission grid planning on 22 March 2022 and starting with the publication of this resolution in the BOE (i.e. on 19 April 2022), the transmission grid operator shall conduct within 2 months a grid capacity assessment and submit the report referred to in article 20 of Royal Decree 1183/2020, of 29 December.

In addition, during the aforementioned period, all the procedures aimed at issuing access permits for the transmission grid nodes to which the time priority criteria applies will be suspended during the abovementioned period, as well as those procedures relating to the issuance of acceptability reports on the applications submitted within the distribution grid aimed at obtaining the corresponding access permits. Once this deadline has expired, the transmission grid operator will analyse the suspended procedures on the basis of the new calculated capacities.

Authorisation of storage facilities.

Royal Decree 1955/2000, of 1 December, regulating the transmission, distribution, trade, supply and authorisation proceedings of electricity installations, is amended in order to align the treatment of storage facilities, hybridized or not, (when connected to the transmission or distribution grid) with generation facilities, for the purposes of obtaining the relevant administrative authorisations as well as for their registration in the Administrative Registry of Energy Production Facilities (RAIPEE).

Modifications to the mechanism applied for the reduction of the remuneration of the electric energy generation activity of non-emitting technologies provided for in Royal Decree-Law 17/2021.

RDL 6/2022 extends the application period of the mechanism aimed at reducing the remuneration of certain energy production facilities set out in the eighth additional provision of Royal Decree-Law 17/2021, of 14 September, on urgent measures to mitigate the impact of the increase in natural gas prices in the retail gas and electricity markets until 30 June 2022 and it also modifies the criteria for applying such mechanism. Among others:

• (i) Energy hedged by a forward contracting instrument executed prior to the entry into force of RDL 6/2022 (i.e., 31 March 2022) will be exempt from the application of the above mentioned reduction mechanism, provided that the hedging price is fixed.
• (ii) Energy hedged by a forward contracting instrument executed after the entry into force of RDL 6/2022, will also be exempt if: (i) its hedging price is fixed and equal to or less than 67 €/MWh; and (ii) has a hedging period equal to or greater than one year. In the event that part of the energy price is indexed to the prices of the peninsular wholesale electricity market, the exemption will only apply to non-indexed portion of the price.
• (iii) A new formula is introduced for the calculation of the reduction in that energy which, even meeting the requirements set out in section (ii) above, its hedging price is higher than 67 €/MWh, as well as several provisions for the application of this mechanism in relation to energy subject to hedging instruments executed between generation and commercialisation companies belonging to the same vertically integrated group.

Elimination of the adjustment value for deviation from the market price for year 2023 and subsequent years.

Royal Decree 413/2014, of 6 June, regulating the generation of electricity using renewable energy sources, cogeneration and waste, is amended so that, in relation to those generation facilities that are entitled to receive the specific remuneration regime, the adjustment value for deviation from the market price for year 2023 and subsequent years is equal to zero. This implies transferring to the owners of the generation facilities the risk of deviation of the pool price in relation to the Ministry's estimates, which will foreseeably stimulate the sale of energy in the forward markets.

Measures relating to the gas sector

Extension of those measures aimed at easing natural gas supply agreements.

The application of the measures included in the fifth additional provision of Royal Decree-Law 29/2021 of 21 December, adopting urgent measures in the energy sector to promote electric mobility, self-consumption and the deployment of renewable energies, are extended until the quotation of the daily product with following day delivery at the Virtual Balancing Point (Punto Virtual de Balance), published by the Iberian Gas Market (MIBGAS), remains below 60 €/MWh for 10 consecutive daily trading sessions, or until 30 June 2022 at latest. Furthermore, RDL 6/2022 also extends until 30 June 2022 consumers' right to suspend their supply agreements.

Measures regarding transport, injection and supply of renewable gases.

The Hydrocarbons Sector Law is amended in order to:

• Modify the existing regulation on direct pipelines in order to allow the injection of renewable gases into the gas system by means of a direct connection from renewable gas production facilities. These pipelines may be commissioned by the renewable gases producer or by a distribution or transport company; and
• Introduce a new additional provision relating to the supply of renewable gases by means of isolated pipelines (canalizaciones aisladas), which is declared to be an activity of general interest. The owner of these installations will be considered a transport or distribution company for the purposes of all the applicable rights, obligations, infringements, penalties, administrative sanctioning procedures and security of supply, depending on the maximum design pressure of the relevant gas pipeline.

In any case, the administrative processing associated to both direct and isolated pipelines -note that both of them are excluded from the hydrocarbons planning- will correspond to the relevant regional body of the Autonomous Community through which these infrastructures are deployed, unless it crosses more than one Autonomous Community, in which case the General State Administration (Administración General del Estado) will be the competent authority.

Measures relating to the use of basic underground storage (almacenamientos subterráneos básicos).

RDL 6/2022 introduces new measures to regulate the use of basic underground storage between 1 April 2022 and 31 March 2023 in order to increase their use during the following annual injection-extraction cycle, such as (i) the exemption from payment of the storage fee for an stored volume equivalent to 7.5 days of minimum reserves or (ii) the reduction to 0 of the fee of annual product auctions for underground storage capacity not allocated for minimum stocks, which will only be subject to payment of the premium arisen from the relevant auction.

New services declared as essential.

RDL 6/2022 amends Royal Decree 1434/2002, of 27 December, regulating the activities of transportation, distribution, commercialization, supply and authorisation procedures for natural gas facilities in order to declare as essential services the supplies to museums, libraries and archives dedicated to the protection of cultural or historical heritage assets.