Fotocampillos.mod

Spain

Greentech is present in Spain with both solar and wind energy, with a total gross installed capacity of 39.8 MW, 30 MW in wind and 9.8 MW in solar energy.

Current tariff system

Solar

In Spain, solar plants are granted a fixed investment remuneration per MW installed, variable for each plant RI (Retribucion a la Inversion) + a fixed remuneration per MWh produced: RO (Retribution a la Operation) + the energy Market Price.

Wind

In Spain, wind farms are granted a fixed investment remuneration per MW installed, variable for each plant RI (Retribucion a la inversion) + the energy Market Price.

Regulatory changes in the renewable energy sector since 2012

In Spain, the financial incentives for energy production from wind energy and PV plants (so-called special regime) has been  regulated by Royal Decree 661 of 25 May 2007. According to this decree, in order to sell the electricity they generate producers may choose between:

selling the electricity to the system through the transport or distribution grid, receiving a regulated feed-in-tariff in euro per kilowatt/hour;

> selling the electricity on the electricity production market. In this case the sale price of the electricity is the price obtained in the organized market or the price freely negotiated by the proprietor or the representative of the facility, supplemented where appropriate by a premium, in euro per kilowatt/hour (this option (b) is not available for PV plants).

Royal Decree 661 of 25 May 2007 established a quota of installed power capacity. Once this quota was exceeded no incentivized economic regime would apply to these technologies unless a new regime was passed. This quota was exceeded for PV plants in September 2008 and for wind energy and solar thermal plants in November 2009.

A new financial system was adopted for PV plants under Royal Decree 1578 of  26 November 2008, but the Government was expected to approve new financial incentives for wind and solar thermal energy.

Between 2009 and 2012 some new legal provisions were passed to correct the tariff deficit, limiting the number of operating hours entitled to financial incentives as well as, in the case of PV plants, the number of years for the payment of the feed-in tariff.

Notwithstanding the above, the most important tariff deficit measure was adopted in January 2012, when instead of the expected law introducing a new financial regime applicable for wind farms and solar thermal energy, the Government passed Royal Decree Law 1/2012, which indefinitely suspended all financial incentives for new electricity generation facilities using cogeneration, waste and renewable energy sources as wind or solar energy.

On 28 December 2012 Parliament adopted the Law on tax measures for energy sustainability, which introduced a new 7% tax on the value of electricity production.

The impact of this tax is taken into account in the Company’s budget and business plan.

On February 2013 Royal Decree Law 2/2013 containing urgent measures in the electricity and financial sectors was enacted. This legislation modifies Royal Decree 661/ 2007, introducing new provisions:

> the remuneration of regulated activities (such as transport, distribution and renewable energy) must be linked to the consumer price index, excluding unprocessed food and energy products, which entails a reduction in the payments to the owners of electricity plants;

> several premiums and tariffs were either reduced or suppressed. The former became 0 euro/ kWh, while some of the higher tariffs were reduced;

> the second remuneration option, consisting of the combined system of pool price plus a premium, was removed. As a consequence, only the fixed FiT system remains, considering that if renewable operators choose the combined system, they will receive only the pool price. When the remuneration option is chosen, it will no longer be possible to change from one system to another in order to prevent producers from adopting the mechanism whereby they sold electricity to the market when the market price was higher than the FiT and went back to the FiT when the market price went down. According to the Government, this fluctuation contributed to an increase in energy prices.

On 12 July 2013, the Council of Ministers approved the Energy Reform, whose purpose is to balance the Spanish electricity system for good and avoid future imbalances in the system.

The Reform includes a Royal Decree Law with urgent measures to guarantee the financial stability of the electricity sector and an electricity sector Bill containing proposals to spread the efforts to balance the system among companies, consumers and the State.

The Reform introduces a new payment system for renewable energy, cogeneration and residues facilities. These will receive a standard fee for each of their technology investments that guarantees a “reasonable return” based on 10-year benchmark government bonds plus three hundred basic points, which represents a 7.5% profit margin. In particular, under the new law, RES producers will not receive a regulated price for the electricity but rather a specific compensation based mainly on the initial investment, that is calculated on a plant-by-plant basis by the Authority, taking into account the following parameters:
a) Standard income from the sale of generated power valued at production market prices;
b) Standard operating costs;
c) Standard value of the initial investment.

The Company has started an arbitration procedure under the Energy Charter Treaty against the Kingdom of Spain in order to claim damages generated by the changes in the renewable energy framework.

In January 2016, the Spanish government held an energy auction for 500 MW of wind power and 200 MW of biomass, the first auction after the moratorium on the incentives for the new renewable energy plants imposed in the beginning of 2012. In December 2016, the government launched a second 1,000 MW auction, this time opened to all renewable technologies. A new, technology-neutral 3000 MW auction is planned for the first quarter of 2017.

Also, on June 2016 the Supreme Court raised the Question of Unconstitutionality of the Tax on the Value of Electrical Energy Production (TVEEP), which applies a 7% tax rate on income from sale of electricity.
The outcome is expected in the second half of 2017.