A Practical Guide to EECs

The challenge of the “Fit for 55” package is not only one of decarbonization, but also of energy saving, and one of the principles of the Fit for 55 is energy efficiency.

The National Energy Efficiency Fund (FNEE), established by Law 18/2014, aims to finance national energy efficiency initiatives, in compliance with Article 20 of Directive 2012/27/EU of the European Parliament and of the Council of 25 October 2012.

The Energy Efficiency Certificate System – EECs (Reall Decree 36/2023), also known CAE (Certificado de Ahorro Energético in spanish) or White Certificates, is one of the mechanisms approved in Spain that will promote the reduction of energy consumption in order to compensate for energy-intensive production and limit the emission of pollutants.

The Energy Efficiency Certificate System – EECs (Real Decree 36/2023), better known as CAE (Certificado de Ahorro Energético in spanish) or White Certificates, is one of the mechanisms that will promote the reduction of energy consumption to compensate for high energy consumption productions and limit the emission of pollutants.

THE LIFE CYCLE OF A CAE

Energy efficiency usually requires significant investment costs, but no or very low operating costs. This is not new; we apply it to many energy production schemes.

Perhaps the simplest way to explain this new system is that we will be able to build a model that better measures savings and supports the financing of the actions that lead to those savings based on the amount of energy saved. This new market has the following main elements:

The Agents

The Obligated Subjects (OS) (Transposition of Law 18/2014) are all electricity marketers, gas marketers, wholesale operators of petroleum products and liquefied petroleum gases, who will have to justify an amount of savings in final energy consumption supplied to industry, transport, households, services, and agriculture.

The Delegated Subjects (DS) are all legal entities of public or private nature that can assume, totally or partially, the delegation of obtaining new annual energy savings from one or several SOs that have been previously accredited as such by the National Coordinator of the EEC System.

The Verifier is an entity accredited by ENAC. The scope of the verification is the material and documentary accreditation of the correct execution of the eligible action generating savings. Transitorily, the Verifiers of the EEC system will be the Greenhouse Gas Verifiers.

The Autonomous Region Manager will be responsible for issuing each EEC where the action has been implemented.

Finally, there is the National Coordinator, who accredits the DS and will receive the EEC issued by the Autonomous Community and will also oversee the traceability of the ownership of the EEC in the purchase and sale operations, and the accounting of settlements, to finally report to the EU on the savings based on the settled EEC.

The Product

The “proof of these savings” takes the form of EECs measured in kWh/year, and which are linked to a specific action, the energy it saves, and the minimum essential documentation that identifies it, also avoiding fraud. They may be:

  • Catalogue (regulations pending, although the Proposed Order was published on 29 May): action sheets that reflect the description of the action, a simple formula or table that translates the basic parameters of the action into energy savings and the list of documents needed to formalize the certificates.
  • Singular (pending regulations): for more complex actions, which will generate more EECs and will have specific calculation methodologies in line with the requirements of ISO 50001.

The Demand

From now on we give Obligated Parties (SOs) the option to take responsibility for seeking and financially supporting savings, and to settle the corresponding part of their obligation by providing us with proof of those savings. Obligors can settle a maximum of 40% through EECs (rising to 65% in 2024 and 80% in 2025). To settle with EECs, SOs can settle directly or through Delegated Subjects (SDs) through an Agreement contract and a EECs can be settled during the following 3 years.

The Offer

All those owners or investors who have the power to develop and implement an energy saving action.

The Price

Is defined by the market by the law of supply-demand and will allow the monetization of the savings. It is important to highlight that there will be a maximum ceiling which will be the Financial Equivalence of the economic contribution that the SOs have to make to the FNEE. This Financial Equivalence is published annually and that of 2023 is 166 €/MWh (Order TED/296/2023).

The EECs will be valid for 12 months from the start-up of the action and will be valid for the first 12 months of the action, although the project will continue to issue savings.

Operational

The certificate process will be:

1) Verification: Accredited Verifier (ENAC).

2) Issuance: Autonomous Community, at the request of SD/SO.

3) Purchase/Sale: SD/SO.

4) Settlement: MITECO, at the request of SD/SO.

The EEC System platform is expected to be available by summer 2023 – probably the first verification module and later the purchase/sale module -. It will include all participating agents, each with their own role and permissions to visualize and exploit the information and will allow SD/SOs to request, buy/sell, as well as to know the status of the requests at any given moment.

The platform will enable the Autonomous Region Manager to analyze and validate the EEC file, issue, and pre-register, and register changes of ownership of the EEC because of the purchase/sale.

Settlement will be carried out by MITECO, at the request of SO/SD. EECs can be liquidated for 3 years and until 1 December they can be requested for registration. Settlement against contribution obligations will be made until 1 March of the following year.

EECs chart

Source: MITECO

THE CHALLENGES

We still have many challenges ahead of us. For example, we have made it possible for the Directorate General for Energy Policy and Mines itself to issue auctions to acquire EECs and avoid a lack of liquidity in this market. Furthermore, the measurement system we are using, kWh/year, is less precise than other cumulative savings measurement techniques such as the kWhcumac used for example in France (pioneers of the EECs). And of course, the Catalogues Regulation, due this summer 2023.

Even so, the system of EECs benefits everyone: demand, because it has the option of meeting its costs at a lower price; energy efficiency investors because they will have additional aid, which, by the way, is not State aid and is therefore compatible with any subsidy (except those coming from the National Energy Efficiency Fund, NEEF); and society in general because the improvement in energy efficiency.

There are only advantages, in environmental, climatic, economic, and social terms and in terms of responsibility for our future.

Prisicila Scheel  |  Decarbonization Head

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