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The electro-intensive consumers will be allowed to offer PPA with the State guarantee

AleaSoft, February 14, 2020. The draft of the Statute of Electro-intensive Consumers that was published this week proposes to compensate the electro intensive industry for some charges of the electricity bill such as the financing of renewable energy and cogeneration and the extra peninsular costs. In order to qualify for these compensations, it will be necessary to sign a PPA of at least five years for at least 10% of the consumption. This PPA will have the endorsement of the State to facilitate its signature with renewable generation facilities.

AleaSoft - Electro-intensive industry

Earlier this week the Draft of Royal Decree regulating the Electro‑intensive Consumers Statute was published and opened for public consultation by the Ministry of Industry, Commerce and Tourism and the Ministry for Ecological Transition and the Demographic Challenge.

This proposal for a royal decree recognises the problems of competitiveness that the cost of the electricity supply causes in the electro‑intensive industry. According to the sources of the electro‑intensive sector, the invoice for this industry in Spain is €15/MWh more expensive than in other European countries such as France or Germany.

The draft recalls that there already exist mechanisms in place to support the electro‑intensive industry, such as the reduction of the Special Tax on the Electricity and the compensation of costs for indirect emissions of greenhouse gases that allow offsetting part of the cost of the CO2 emission rights impacted on the cost of the electricity supply.

As for new mechanisms to support the electro‑intensive consumers, the draft of royal decree proposes the compensation to these consumers for the costs of financing renewable energy included in the electricity bill. The other two compensations proposed by the draft are for the costs of financing high‑efficiency cogeneration and financing of extra‑costs of the extra‑peninsular territories, which are also impacted on the charges for the electricity supply bill.

For the first time, in the draft of royal decree the conditions necessary to be recognised as an electro‑intensive consumer are defined, which will have to be accredited by the industries if they want to benefit from the proposed compensations. According to the draft, an electro‑intensive consumer is one with an annual consumption of at least 1 GWh. But, in addition, its consumption profile will have to have a series of additional requirements, such as the half of the consumption is in valley hours and being a stable and predictable consumption.

But, without a doubt, the most striking point of the proposal is the obligation to sign a long‑term supply contract, a PPA, in order to qualify for any of the compensation mechanisms included in the royal decree. The PPA will have to be, at least, for five years and, at least, for 10% of the consumption of the electro‑intensive installation, and aims to encourage the purchase of electricity from renewable facilities.

A very important point of this PPA requirement is that it will be the State that will cover the insolvency risks of the electro‑intensive consumer. In this way, the PPA contracts will become electricity purchase contracts endorsed by the State. These guarantees will be financed through the Reserve Fund for Guarantees of Electro‑intensive Entities that will be created and will be managed by CESCE, the Spanish Company of Export Credit Insurance. The Government plans to initially limit this fund with 600 million Euros for the first three years, although if the pace of PPA signatures is high after the entry into force of the royal decree, more than 800 million Euros could be needed.

A PPA with the State guarantee is a very attractive contract for the renewable generation facilities projects, as it covers one of the greatest risks to which they were exposed when signing a PPA, such as the risk of default or bankruptcy of the buyer. So this proposal for a royal decree is very important news for the renewable energy sector in general and for the photovoltaic energy sector in particular.

AleaSoft collaborates with the Association of Companies with High Energy Consumption (AEGE, by its acronym in Spanish) and with other electro‑intensive companies and can serve as a coordinating link with developers to generate opportunities for agreements for PPA. The vision of the future of the electricity market provided by the long‑term price forecasts is essential to evaluate and make responsible decisions about the risk management that involves the signing of a long‑term contract.

Source: AleaSoft Energy Forecasting.

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