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First measures of the new Royal Decree law: renewable energy auctions and connection permits

AleaSoft, July 7, 2020. The great interest that the content of the Royal Decree‑law 23/2020 aroused is a sign of the relevance that it will have in the renewable energies development during the energy transition and the path towards the decarbonisation of the electricity production in Spain. In this article we review the first block of measures of the Real Decree‑law, which includes the terms and milestones of the access and connection permits, and the new auctions of renewable energies.
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Just two weeks after its publication, the amount of news, summaries, comments and opinions that were published on the Royal Decree‑Law 23/2020 with energy measures for the economic reactivation only shows its importance and how much expected it was for the energy sector in Spain.

This new Royal Decree‑law is another rule to add to the extensive regulations that order the electricity sector in Spain. In this case, the RDL responds to the need to order the installation of the new renewable capacity to advance in the decarbonisation of the electricity generation in the energy transition in order to make it possible to achieve the objectives of reduction of greenhouse gas emissions and renewable capacity by 2030 of the Integrated National Energy and Climate Plan (NECP).

For this, the Royal‑Decree‑law is part of the necessary measures to be taken to recover from the economic crisis caused by the COVID‑19 pandemic. The RDL intends that the investments in renewable energy projects are the green lever that drives the economic recovery.

The first measure is aimed at regulating what is surely the most urgent and notorious problem for the new renewable energy projects: obtaining access and connection permits to the electricity transmission and distribution grids. The disproportionate number of projects queuing up for the permission required reflection on how they are assigned and what milestones each project is expected to reach until the time of the start of its commercial exploitation.

AleaSoft - Access connection requests Spain MWSource: Prepared by AleaSoft using data from the Ministry for the Ecological Transition and Demographic Challenge.

The second measure enables the Government to define a new remuneration framework for the electricity generation from renewable energy sources. Precisely, the Royal Decree proposal defining this new remuneration framework is in the process of public consultation until July 17. The new name to which we will have to get used to is Economic Regime of Renewable Energies for Electric Power Production facilities.

This new framework will be awarded through auctions that can be both of energy and installed capacity and it will recognise a long‑term fixed price for the generated energy. In these new auctions, the price to be received for the energy will be offered and it will be possible to distinguish among different generation technologies, paying special attention to the particular needs of the renewable energies communities and the smaller facilities so that they can compete on equal terms.

The financing of renewable energy projects

Without a doubt, the new remuneration framework will make things a little easier for the new renewable energy projects seeking financing. Although it was previously commented that the investor appetite did not decreased during the COVID‑19 crisis, it is also true that most banks are not yet offering financing for merchant projects and that many of them require a sufficiently long‑term PPA or long‑term guaranteed remuneration obtained at auction.

According to AleaSoft, the long‑term electricity market forecasting establishes a stable trend of the average market prices that in most cases could provide sufficient profitability to access financing.

Source: AleaSoft Energy Forecasting.

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