Remuneration for spanisch renewable energy installations for 2017 published

​In a nutshell:

Marginal increases in the specific remuneration for the existing Spanish renewable energy installations were adopted on 17 February. The reason is a lower market level for electricity prices in the Iberian Peninsula than initially planned by the Spanish Energy Ministry.

After the Spanish government changed its paradigm in 2012, the existing Spanish renewable energy installations receive no feed-in tariffs based on produced kWh, but a specific fixed remuneration  based on standard investment costs of a typical installation, which, in turn, will be subject to specific yield during the regulatory life of the power plant. The rate of return until 2019 is set at 7.5 percent. Example: In the year of its commissioning  (2008), a 100 kW PV plant received specific fixed remuneration of 56,869.90 euro per year. In addition,  the power plant was paid an incentive of 2.56 eurocents/kWh  and was remunerated with the normal spot market price [of electricity]. 

In 2014, the calculation of the specific remuneration was based on a spot market price, which has not been reached in the last three years. The specific remuneration has now been adjusted in Article 16 of Royal Decree 413/2014. The 100 kW power plant mentioned in our example receives now specific remuneration of 56,971.60 euro for the years 2017, 2018 and 2019. The insignificant increase in the specific remuneration of almost one percent comes along with a reduction in the minimum number of hours that a renewable energy installation must operate in a year to produce power so as to be eligible for the specific remuneration. So far, the 100 kW power plant mentioned in our example had to operate at least 577 hours per year, and now this number has been reduced to 568 hours. By contrast, nothing will change about the additional allowance for the production cost (if granted) and the remuneration based on the market price. 

The recent adjustment has already cast a shadow on the adjustment planned for 1 January 2020. By then, the first full production period of 6 years will have expired and all parameters will be put to the test, especially the ”reasonable rate of return/yield” of the investment which now is 7.5 percent. ”Reasonable rate of return/yield” means the yield on Spanish 10-year bonds during the 24 months before the end of the production period plus a correction factor of 300 basis points. It remains to be seen how the government bonds will trend and whether the Spanish government will actually adjust the remuneration downwards – provided that today's yield on government bonds does not change until 2019. It is also possible that the correction factor will be adjusted, so the adverse impact on the government bonds will be eliminated.