Energy Spain Newsflash October 2022

On 11 October, the Council of Ministers, at the request of the Ministry for Energy Transition and the Demographic Challenge (MITERD), approved the Plan + Energy Security (Plan +SE).

The Plan +SE consists of the implementation in Spain of the measures approved in the European Union to deal with the energy crisis. This Plan is introduced as an instrument to increase consumer protection, reduce gas consumption and increase solidarity with other European countries.

The Plan +SE contains 73 measures structured in six main blocks: (i) energy saving and efficiency; (ii) promotion of the energy transition; (iii) protection of vulnerable consumers, households and businesses; (iv) tax measures; (v) strategic autonomy; and (vi) solidarity mechanisms with other Member States. Please find below a summary of the most relevant measures of the Plan +SE:

In terms of energy saving and efficiency

Public sector:

(a) Annex A of the Plan +SE provides recommendations for energy saving and efficiency in public buildings.

(b) A period of three months is established for all public administrations to draw up a plan for the implementation of self-consumption in public buildings, including the self-consumption potential to be installed in 2023; and the self-consumption potential to be installed in five years and the planning carried out to achieve it. This planning may include the transfer of space to third parties in order to develop these projects.

(c) Promotion of energy efficiency agreements and savings clauses in public administrations.

(d) Establishment of a loan programme under the National Energy Efficiency Fund for the renovation of municipal outdoor lighting to reduce energy consumption.

Households:

(a) Annex B of the Plan +SE includes recommendations to be circulated to the public and private sectors.

(b) Information and transparency on energy bills:

• Electricity and natural gas suppliers will be obliged to include in their bills for small customers (electricity customers with a contracted power of 15 kW or less and natural gas customers with a consumption of less than 50,000 KWh/year), information on the average consumption of consumers sharing the same postcode and advice to reduce energy consumption.
• Likewise, the aim is to improve consumers' understanding of the different elements that compose their bill. For this reason, a regulatory framework will be implemented to standardise the name and the fit of the term associated with the Iberian mechanism in the electricity bill.

(c) Replacement of analogue natural gas meters to ensure remote metering and operation. Users would, as a minimum, have access to their daily consumption data, as opposed to the bimonthly data currently available.

(d) The allocation for the PREE 5,000 programme is doubled to EUR 200 million.

Industrial sector:

(a) The aim is to increase cogeneration electricity generation. To this end, a voluntary mechanism has been approved to waive the specific remuneration regime for cogeneration plants during the period of time in which the adjustment mechanism regulated in Royal Decree-Law 10/2022 of 13 May, is in force. These facilities will not be considered to have a remuneration framework for the purposes of the application of the aforementioned mechanism, and will be able to apply for it. Further information on the subject can be found in our previous newsletters on Royal Decree-Law 10/2022 and Royal Decree-Law 17/2022.

(b) On 1 August 2022, the Monitoring and Control Committee of the National Energy Efficiency Fund approved an increase of €100,000,000 in the budget of the aid programme for energy efficiency measures in the industrial sector.

Tertiary sector:

(a) The Government has activated a new aid programme for energy refurbishment actions in existing buildings in the tertiary sector (PREE Terciario). The programme will have a budget of €100 million, charged to the National Energy Efficiency Fund.

(b) Green Kit: Through the ICO, a programme will be promoted to finance renewable energy and energy efficiency actions in SMEs.

Listed as cross-cutting measures are the following:

(a) Annex C of the Plan +SE includes recommendations to be circulated to companies.

(b) It is proposed that large companies (with turnovers above 50 million euros or more than 250 employees) should draw up and publish energy saving contribution plans, including those measures identified as most profitable and feasible in the short term, and may also include those measures already adopted to date. These plans will be uploaded within three months on the electronic platform set up for this purpose by MITERD and will be publicly accessible. Companies will be able to report every 6 months on the progress in the implementation of the respective plans.

(c) Energy Saving Certificates will be implemented in the first half of 2023. To increase the possibilities of their application, the metering system will be allowed to also consider primary (as well as final) energy savings, which will contribute to reduce the primary demand for fossil fuels, such as natural gas.

Regarding the promotion of the energy transition

Integration of renewables into the system:

(a) Implementation of administrative simplification measures in the administrative processing of renewable generation projects and maximisation of the capacity of electricity grid. For further information on Royal Decree-Law 17/2022, please click on the following link.

(b) The proposed regulatory framework for the development of offshore wind and marine energy will be published before the end of 2022. With the objective of reaching an installed offshore wind power capacity of 1 to 3 GW by 2030, it is necessary to update the authorisation and investment promotion framework. The proposal will be based on the coordination of the authorisation procedure for electricity installations, the granting of rights to use marine space and access and connection to the electricity system.

(c) A new transmission and distribution network planning process for the period 2024-2029 will be launched in January 2023. The aim is to reinforce the transmission and distribution networks to increase the capacity of renewables that can be connected to the grid. In addition, in the last quarter of 2022, a specific modification of the 2021-2026 Plan will be processed, which will prioritise those actions that are strategic for the energy transition.

Self-consumption and energy communities:

(a) An extension of 500 million euros will be executed for self-consumption promoting programmes.

(b) The self-consumption regulations will be amended to expressly allow for the collective representation of all consumers in the shared self-consumption project.

(c) The connection between renewable generation and consumption facilities will become more flexible. In order to promote renewable self-consumption for direct lines connecting renewable generation plants with consumers, requirement that both producer and consumer belong to the same business group will be removed.

(d) The regulatory amendment will also remove the provision that established that two or more installations located in the same cadastral reference would be considered the same installation for the purposes of obtaining access and connection permits. This will facilitate better use of space for the deployment of self-consumption.

(e) The increase of the distance limit of 500 metres for self-consumption through the grid will be addressed, seeking a formula that combines the efficiency of the measure by maximising the use of roofs and minimising losses in the grid.

(f) In order to promote the development of renewable energy communities, it is proposed that a royal decree be enacted to complement the provisions of the Electricity Sector Act. In addition, two public aid programmes will be launched imminently:

• to enable public or private entities to set up information, dissemination and training points on the possibilities and advantages of promoting and participating in energy communities; and
• to support energy community pilot projects.

Renewable gases and thermal uses:

(a) Within one month, a heat demand map for the entire national territory will be published on MITERD's website. This map will identify areas where it is necessary to cover thermal demand with renewables.

(b) Heat and cooling networks will be promoted through the deployment of policy measures.

(c) The implementation of the system of guarantees of origin for gas from renewable sources (GdOs) is brought forward to March 2023.

(d) The administrative processing of projects for the injection of renewable gases into the existing natural gas network will be facilitated.

Acceleration of the Recovery, Transformation and Resilience Plan:

(a) The ICO-IDEA financing line will allow to advance the funds of the aid granted in the programmes of the Recovery, Transformation and Resilience Plan.

(b) Energy efficiency measures in the tourism and commercial sector will be expedited:

• With regard to the tourism sector, access to loans from the State Financial Fund for Tourism Competitiveness (FOCIT) will be made available before the end of 2022 for projects that promote innovation and modernisation of tourism enterprises, especially for actions in the areas of energy and sustainability and materials and construction.
• In the commercial sphere, in the lines of aid to local entities for the improvement of the commercial sector, local entities will be encouraged to include energy saving actions aimed at commercial areas in their projects.

(c) The PERTE ERHA - renewable hydrogen and storage - will be accelerated. This PERTE will mobilise more than €3.5 billion of public funds for measures that will accelerate the development of the entire value chain around the energy transition.

(d) The PERTE Industrial Decarbonisation, aimed at the manufacturing sector, will have the following objectives: (i) improve the competitiveness of the manufacturing sector; (ii) promote the use of renewable energies; (iii) promote environmental protection; and (iv) create high value-added employment. The PERTE Industrial Decarbonisation will contain a comprehensive action aid line for the decarbonisation of industrial facilities and facilitating measures to support the decarbonisation of the industrial sector.

Regarding the protection of vulnerable consumers, households and businesses:

(a) A reform of the PVPC is promoted to partially de-index the regulated tariff from the hourly evolution of the daily and intraday markets, linking it in part to the price of certain forward products traded on the organised markets.

(b) The contracted power in both electricity and gas supply contracts is temporarily softened and more than one modification of the capacity will be allowed every 12 months. Also, the protection of natural gas consumers will be reinforced, limiting the maximum penalty that companies can set for the termination of the contract by the consumer in the first year of its validity, as well as establishing the obligation to terminate the additional services contracted at the same time as the termination of the supply, unless the consumer expressly indicates otherwise.

(c) Support for the industrial sector is consolidated. Compensatory aid for indirect CO2 emission costs is maintained at € 244m by 2023. The Government may increase this amount during the year 2023. The budget assigned to this mechanism may be increased to a maximum of 25% of the revenue from emission rights.

Tax measures

(a) The reduction of the applicable VAT to a 5% rate for natural gas and biomass briquettes and pellets and wood for firewood were approved by Royal Decree-Law 17/2022.

(b) Tax incentives will be provided for the adoption of solutions to replace the use of fossil fuels with renewable energy.

In terms of strategic autonomy

(a) The active demand response service, created by Royal Decree-Law 17/2022, will be operational by 1 November 2022.

(b) Efforts will continue on the transposition of the Internal Market Directive.

(c) In accordance with EU Regulation 2017/1938, the Technical Management Rules of the Gas System will be updated in order to be able to deal with any eventuality that may occur in the gas system with guarantees.

(d) The PNIEC will be updated, to bring it into line with the new context and to comply with the mandate of the Energy and Climate Union Governance Regulation, which establishes the need to update these plans by 2023.

(e) The regulatory sandboxes are identified as a tool to promote innovation and research. The aim is to allow pilot projects to participate in a regulatory test bed, which is an experimental environment in which to carry out tests or trials, applying regulatory exemptions in a safe and controlled manner, in order to promote innovation, research and regulatory improvement in the electricity sector.

(f) Gas turbines will be replaced by more efficient electric motors at ENAGAS' Compression Stations (EECC), which will generate natural gas savings in the operation of the gas system.

(g) An additional budget line of more than EUR 1 billion will be disposed for the reinforcement of the energy transition value chain, aligned with the PERTE ERHA.

(h) Spain is proposed as the lead Member State for an IPCEI initiative to impulse solar photovoltaic projects at European level.

In relation to solidarity mechanisms with other Member States

(a) It is ordered to make maximum use of the existing interconnection infrastructure with France, increasing export capacity in this area by 40 GWh/day. This interruptible capacity could be made available to the market from 1 November.

(b) The ports of Barcelona and Cartagena will be adapted, through the installation of a second berth, so that they can load LNG on small LNG carriers. As a result, export capacity to Italy could be increased.

(c) The Musel regasification plant will be brought into operation, with the aim of making additional storage available to Member States. The first tank could be operational in January 2023 and the second tank between April and June 2023.

(d) Reference is made to the Iberian hydrogen corridor, foreseen in the REPowerEU programme. This is conceived as a gas interconnection already prepared to transport hydrogen of around 230 GWh/d between Spain and France. It is expected to be operational by 2025.