News From Spain: Moratorium On Grid Connection Applications To End On 1 July 2021 – Capacity Market Bill

published on 20th May 2021

The moratorium on applications for the granting of grid connection and access points, which has been in force since July last year, is finally to end de facto on 1 July 2021, according to press reports, after it had already officially expired at the end of March. On 1 July, the web portals of the network operators, introduced by the new Grid Connection Act RD 1183/2020 of 29 December 2020, are to go online. On these web portals – which are sine qua non to filing online applications as required now – all network operators are required to publish their free capacities available at power grid nodes and transformer stations on a monthly basis. Up to now, this has been done exclusively by the national electricity system operator REE – often not on a monthly basis.

An interesting aspect of the new web portals is the obligation of the applicant to take a screenshot at 8.00 a.m. on the date of filing the application, showing that sufficient connection capacity was available at that time. If the applicant fails to do so and its application is rejected due to lack of capacity, the competent authority can withhold 20 per cent of the financial guarantee provided (€40/kW).

It is being discussed in the market whether applications can already be submitted now although the web portals have not been launched yet, as the official moratorium was only valid until three months after the publication of RD 1183/2020, i.e. until the end of March 2021. REE has published on its website that the capacities mentioned there are not intended to apply in the sense of the new RD 1183/2020. Rödl & Partner therefore assumes that filing applications before the launch of the web portals will not be allowed.

Spain must introduce a capacity market based on auctions, as according to the legislator the stability of the electric power system is jeopardized by the massive expansion of renewable energies. Maintaining conventional power plants as part of a production reserve (capacity reserve) is no longer profitable as wholesale prices for electricity decreased as a result of the increased share of renewable energies and such power plants are no longer built or shut down.

By issuing Regulation 2019/943 on the internal market for electricity, the EU has already made it possible to establish such a capacity market subject to strict conditions. Spain is now meeting these conditions by bringing forward its bill.

The reserves that the capacity market participants must maintain are divided into primary capacity (capacidad principal) and balancing capacity (capacidad de ajuste). The primary capacity of new power plants is remunerated for a maximum period of five years, and that of existing power plants for a period of twelve months. As regards power plants yet to be built, a maximum period of five years may elapse between the award of the contract and commissioning.

Before the first capacity auction, REE is yet to define the criteria for security of supply, especially for renewable energy and storage facilities.

It is also interesting to note that new power plants must be CO₂-free. Old power plants may emit a maximum of 550 grams of CO₂/kWh. Since only new power plants are eligible for the maximum five-year support, the auctions of primary capacity with a five-year term will be tailored exclusively to renewable energy power plants with storage media. Depending on the possible revenues to be reaped, this could be a new opportunity for renewable energy power plants. It remains to be seen how the specific supply guarantees will be designed and what penalties are envisaged for non-compliance, and of course what revenues can be achieved by participating in the capacity market.