This is an extract from a briefing by Clifford Chance titled “Spain: Mechanism To Reduce The Wholesale Price Of Electricity And Adjustments To The Specific Remuneration System For Renewables: RD-Law 10/2022”
The mechanism seeks to directly reduce the wholesale price of electricity by imposing on the power purchase units that will benefit from the mechanism, the obligation to cover the production costs of certain plants in excess of the natural gas reference price set by the Spanish Government. Also noteworthy in the package of measures adopted is the modification of the specific remuneration system, reintroducing the adjustment for market price deviations that Royal Decree-Law 6/2022 had eliminated.
- A mechanism to reduce the wholesale price of electricity has been temporarily approved.
- This mechanism will coexist with the one for reducing excessive revenues and the maximum of €67/MWh established in RD-Law 17/2021 until 30 June of this year.
- The adjustment is subject to authorisation by the European Commission and will only apply after such authorisation is published in Spain’s Official State Gazette.
- However, the Royal Decree has entered into force immediately, setting urgent and strict documentation and information obligations for power purchase units hoping to be excluded from the duty to pay for this adjustment.
- The adjustment for market price deviations is reintroduced for renewables with a specific remuneration system, but the value of futures is weighted.
RD-Law 6/2022 eliminated, for energy generated in 2023 and thereafter with the right to specific remuneration, the adjustment for deviations in the market price of electricity as compared to the forecasts taken into account for each three-year regulatory half-period (and each six-year regulatory period). This increased the risk associated with such deviations, the goal being to incentivise the signing of PPAs with fixed-term prices.
This adjustment has now been reintroduced, again with changes to how it is regulated, so that the value of the adjustment includes the deviations from both the current price of electricity on the market and from the price of annual, quarterly and monthly futures, weighted accordingly. In 2022, only the current price will be taken into account, not the price of futures. For 2023, the change in the current price is weighted at 0.75, the change in annual futures at 0.15, in quarterly futures at 0.025, and in monthly futures at 0. For 2024 and 2025, the weighting of futures prices will be set by Ministerial Order and will be at least 50% and 75%, respectively.
The value of the adjustment for small-scale power plants is calculated taking into account the deviations from the average annual daily and intraday market price for each year, without considering the price of futures. For these purposes, small-scale power plants mean:
a) cogeneration and biomass plants with a capacity of 1MW or less;
b) photovoltaic, onshore wind farms and hydroelectric power plants with a capacity of 5MW or less.
The complete briefing can be accessed here