Spain removes 3 GW target for RES auctions in new Climate Law

Spain's government has approved its new Climate Change and Energy Transition Law which lays out the country's new regulatory framework for the renewable sector, including a switch to output-based renewable auctions and a removal of a previously announced 3 GW/year target.

The text was approved by the Cabinet on May 19 and has been submitted to the Courts for approval, after which it will be subject to parliamentary approval, the country's Ministry for Ecological Transition announced.

The new renewable regulation confirms previously announced plans to carry out auctions to award capacity, but the previous target of 3 GW per year has been removed from the final law.

The change would leave the possibility for the system to be adapted depending on market needs, RBC Europe said in a research note May 19.

The retribution system will switch from a previous referencing to return on invested capital to one that is linked to a long-term fixed price for the energy produced, the ministry said.

The new system would create stability and predictability for the sector's income, it said. The auctions will center on either the output, installed capacity or a combination of both, with bidders competing over the price of their output. There will also scope for the auctions to be tailored to distinguish between different technologies.

In order to improve flexibility the government said it will encourage hybrid plants such as combined PV and wind plants which can share an access point to the grid.

The new Law will also create a legal framework for supply side services such as the creation of an independent aggregator that can sell or buy aggregated volumes of demand and for a centralized storage entity, the Ministry said, without adding specific details.

A repowering of existing installations is also covered allowing well-sited existing plants to upgrade and maximize their potential. This regime would be also be used to promote new hydro pumping projects in the case of new hydro concessions.

The renewable sector will also benefit from a Eur450 million/year contribution from the CO2 emissions permit auctions, which should help stem a growing deficit that has started to grow due to low wholesale prices and reduced demand.

Zero emissions

The overarching law is designed with the goal of emissions neutrality by 2050, with the country's generating sector reaching 100% of renewable energy by that date, with an interim target of 70% by 2030.

To reach this target, Spain will need to install around 27 GW of new PV and 25 GW of new wind capacity by that date.

The government said the project will position the economy to seize opportunities to modernize itself and reindustrialize following the impact of the coronavirus pandemic, while also generating employment, all in line with the European Green Deal.

The ecological transition is expected to attract Eur200 billion of investment over the next 10 years while creating up to 350,000 new jobs, the ministry said.

A major cornerstone for the reindustrialization will be sustainable transport, with a target of CO2 emission free vehicle fleet by 2050. Low emission zones will be introduced in towns larger than 50,000 inhabitants by 2023, the ministry said, while new buildings will have to include EV recharging points by 2025.

To encourage decarbonization, Spain will push the use of biogas, biomethane and hydrogen and at the same time carry out a revision of existing incentives for more carbon-intensive businesses.

The law will also put a halt to new exploration permits in the whole country, with a total ban on fracking while energy efficiency measures are also to be introduced, intended to reduce primary energy demand by at least 35%.