On Friday, October 5, we received a news that most people welcomed with open arms: the Spain government ends with the “Sun tax”. After years of controversy and battles, the Royal Decree “Real Decreto-ley 15/2018, de 5 de octubre, de medidas urgentes para la transición energética y la protección de los consumidores” puts an end to almost 3 years of obstacles for the installation of energy renewable. Bellow, we will analyze in more detail the implications of this important change.
What was the “Sun Tax”?
When we refer to the incorrectly called “Sun Tax”, we are referring mainly to the backup toll (or charges of RD 900/2015). To explain it in a summarized way, it is a charge that had to be paid to continue having the electric grid available, although the kWh that we are consuming are generated by our own installation. The defenders of this tax based on the fact that the variable part of the electricity bill does not go entirely to remunerate the cost of generating electricity, but it is also destined to finance the remaining fixed costs of the system, therefore, if a self-consumer leaves of paying that part of its energy when it consumes his own energy, this would make the invoice of the rest of the consumers (which would have to contribute more to cover transport costs) more expensive.
This tax, therefore, did not apply to an isolated renewable installation, since at no time did it use the transport and distribution grid (not even as backup).
In reality, this tax was barely applied, but it worked largely as a dissuasive effect of the installation of renewables.
But there were more obstacles:
That was not all, the Royal Decree “Real Decreto 900/2015 de 9 de octubre de 2015”, in addition to including the backup toll, added multiple obstacles and complications that took away from anyone the desire to have their renewable installation connected to the grid. Let’s review some of the most important and how they have changed after October 5:
- Paperwork: with the previous legislation, a large amount of administrative procedures had to be faced when legalizing a self-comsumption installation connected to the grid. As an example, the first shared installation in Spain needed a year of paperwork and bureaucracy until it was put into operation. One of the most important changes of this reform is the simplification of the procedures. According to the new decree, only large facilities that are going to inject electricity into the grid must ask the electricity companies for permission to connect. Domestic facilities are exempt from this requirement, in addition to the obligation to sign up in the self-consumption register.
- Charges and tolls: the new decree also prohibits establishing charges or tolls for the renewable energy.
- Sanctions: the previous legislation contemplated unaffordable sanctions (which could reach up to 60 million euros) for facilities that did not comply with the regulation. The new decree establishes that the sanction can never exceed 10% of the consumer’s annual bill, something much more reasonable.
A renewable future:
It seems that everything is aligned in favor of renewables. Last Tuesday, November 13, the European Parliament approved the new Renewable Energy Directive by overwhelming majority: 495 votes in favor and 68 against, thus exceeding its last procedure. This directive will have to be transposed to the national laws and regulations before June 30, 2021. We summarize the main novelties:
- New targets:
- Binding target: 32% renewable energies by 2030.
- Indicative target: improvement of 32.5% in energy efficiency of the whole of the EU block by 2030
Both targets will be revisable in 2023, but only to raise the objectives and not to reduce them.
- Right to self-consumption: charges and fees are forbidden for self-consumed energy (at least until 2026).
- Right to remuneration for the generated energy: the right to obtain remuneration for the renewable kWh generated and injected to the grid is contemplated.
- Simplification of procedures.
- Interconnection: 15% electric interconnection target for 2030. Important objective for Spain to have greater export capacity and to avoid limiting its production increase.
- Transportation: at least 14% of the fuel used for transport will have to come from renewable sources by 2030.
- National targets: Member States are required to design an energy and climate strategy with national objectives, contributions, policies and measures by December 31, 2019 and with a periodicity of ten years from that date.
Reactions to news in the renewables field have not been long in coming. Companies, municipalities and domestic consumers already consider investing in renewable energies motivated by the legal certainty provided by the latest regulatory changes. We have even seen how the media echoed the news that the furniture and decoration giant IKEA has announced that they will start selling solar panels in Spain soon (it currently markets them in another 6 countries).
Another example is the British oil company BP, which has already begun plans to invest in renewable energies in Spain so as not to be left behind by its main competitors, which are also transforming their oil business to global energy companies.
But there is more:
More good news for renewables, we must also add the fact that the government should present the Climate Change and Energy Transition Law draft in December, with which it plans to give a boost to green energies. Government sources have announced new auctions for the installation of renewable technologies of at least 3,000 MW of power per year in the period between 2020 and 2030.
The Government’s target is to achieve a 100% renewable electric system in 2050.
Beyond the “Sun Tax”:
As suggest the title of this entry, what awaits us for the coming years in the field of renewable energy goes far beyond the elimination of this tax so difficult to understand and that delayed our path towards a clean generation mix for 3 long years.
We are facing a firm commitment to green energy both by the government of Spain and by European regulations.
As with all changes, the path will be difficult. If all the measures put on the table were carried out, our electricity market would be transformed and respond to new game rules.
We could ask ourselves many questions: how will these changes affect market prices? How will these measures be financed? Will the consumer end up paying as in previous occasions? Will the stated targets really be achieved?
What is clear is that we have before us a golden opportunity to positioned ourselves at the forefront of Europe in terms of renewable energies.
Ismael Abordan | Energy Consultant