The Council of Ministers approved on Tuesday May 19, 2020 the Draft Law on Climate Change and Energy Transition (PLCCTE). A regulation that aims to lay the foundations for a new, greener, more sustainable economy and that will help Spain recover from the economic crisis that is looming after COVID-19.

It includes 36 articles distributed in nine titles, and incorporates the contributions of the public participation process that began in February 2019, so that Spain complies with the Paris Agreement in line with the commitments of the European Commission and with the Pact. European Green through the right signs to modernize the economy.

These are the main points that affect the energy sector covered by the new Law on Climate Change and Energy Transition:

Objectives

The legislative project aims for Spain to achieve neutrality of greenhouse gas emissions by 2050 at the latest. This means that Spain, in 2050, will only emit the amount of greenhouse gases (GHGs) that its sinks can absorb. To achieve this, the text sets the following objectives, which can only be revised upwards:

  • In 2030, the emissions of the Spanish economy as a whole should be reduced by at least 20% compared to 1990. Compared to 2017, the last year with consolidated data, this effort involves removing around 33% of emissions, in other words, approximately one out of every three tons of CO2 currently emitted.
  • Before half a century, Spain’s electricity system has to be 100% renewable, and by 2030, 70% of electricity must be generated from renewables and without carbon presence.
  • Energy efficiency measures will have to reduce primary energy consumption by at least 35%.
  • At the end of the next decade, at least 35% of final energy consumption must be of renewable origin.

The objectives already show that this law presents a clear commitment to renewable energy and energy efficiency as new economic engines and “decarbonizers of the economy”.

Renewable energy

  • Promotion of energy self-consumption:

The figure of the storage holder is created as a subject of the electrical system. This favors the implementation and development of these technologies, which are key in managing electricity demand and security of supply in a 100% renewable electricity system. It is also an industrial segment in which Europe and Spain aspire to acquire leadership positions.

Likewise, the figure of the independent aggregator is established, which will participate in the market by buying or selling different aggregate consumptions or electricity generated from consumers, producers or storage facilities. It is a new business model that, in addition, enables the user to further optimize their consumption or the energy they produce in self-consumption facilities.

Hybridization is promoted, that is, that different generation technologies are incorporated in the same installation, such as incorporating solar panels in a wind plant.

In addition, the repowering of the facilities is contemplated, which may increase its installed power until reaching the maximum that it is allowed to pour into the network. The idea is to optimize the use of renewable resources from the best locations, minimizing costs and environmental impact.

  • New remuneration for renewables:

In order to keep pace with the introduction of renewables in the system, the text foresees that the Government develop a new remuneration framework for renewable generation, based on the long-term recognition of a fixed price for energy.

With this, predictability and stability in income are offered to the sector and the savings associated with the deployment of these energies, which are the cheapest source, are transferred directly to consumers. Moreover, this seeks legal certainty that the policy of promoting renewable energy will be maintained and avoid the mistakes that occurred in the previous financial crisis with the bubble of “solar gardens”, promoted by the government of José Luis Rodríguez Zapatero, and endorsed by Royal Decree 661/2007 that guaranteed subsidies that were abolished, left thousands of investors ruined and the future of renewables highly questioned.

The new remuneration framework will be granted through auctions in which the product to be auctioned will be electric energy, installed power or a combination of both, and the variable on which it will be offered will be the price of remuneration for said energy.

Below is a sample of how this remuneration can take place, as well as the panorama of government support for the different technologies and agents in the energy sector.

Economic and regulatory support for energy:

  • Economic injection from the General State Budgets:

The project establishes that a percentage of the General State Budgets will be used to contribute to the objectives of climate change and energy transition. The amount will be equivalent to that agreed in the European Union’s Multiannual Financial Framework and will be revised upwards by the Government before 2025.

Specifically, for renewables, the bill provides that the General State Budgets allocate to the promotion of renewable energy the estimate of the annual collection of taxes included in the Law on fiscal measures for energy sustainability. This would translate into the proceeds from the auctions of greenhouse gas emission rights that will also be used to meet the climate change objectives: “at least 450 million will be used each year to finance the costs of the electricity system referred to the promotion of renewable energies ”.

  • Divestment in energy products of fossil origin:

Through specific plans, the use of renewable gases will be promoted, including biogas, biomethane, hydrogen, and no new fossil energy projects are expected to be authorized. Furthermore, the application of new tax benefits to fossil energy products must be duly justified for reasons of social, economic interest or due to the absence of technological alternatives.

As of the entry into force of the future law, no new exploration authorizations, research permits, or hydrocarbon exploitation concessions will be granted throughout the national territory. High-volume hydraulic fracturing, ‘fracking’, will also not be authorized.

Regarding active facilities, five years before the expiration of their concession they must submit to MITECO a report that reflects the potential for reconversion of the facilities or the location for other uses, including geothermal energy, or the installation of energy renewable.

  • Control over regulated entities in the energy sector:

In accordance with the development of the Decarbonization Strategy to 2050 established in article 5, the Government is empowered to require the market operator, the system operator, the carrier and the distributors, defined in article 6 of Law 24 / 2013, of December 26, of the Electricity Sector, to prepare and present a decarbonisation strategy regarding its scope of action.

To conclude, I must point out that the objectives of the Climate Change Bill (PLCCTE) will be achieved through the successive Energy and Climate Plans (PNIEC) that are scheduled to be re-established every ten years. The first of these, from the period 2021-2030, foresees a private investment of 200,000 million euros and a generation of employment between 250,000 and 350,000 net annual jobs. I do not know the difference of 100,000 jobs in your forecasts, but if you mention that “the mobilization of investments, energy saving and a greater presence of renewables, will allow the Gross Domestic Product (GDP) to increase by around 1.8% in 2030, regarding a scenario without measures. Specifically, “between 16,500 and 25,700 million euros”.

Marta Merodio | Energy Consultant

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