On 20 June 2014, Ministerial Order IET/1045/2014, of 16 June, which regulates the specific remuneration parameters of standard facilities applicable to certain electricity generation facilities through renewable energy sources, cogeneration and waste (“Order IET/1045/2014”), was published in the Spanish Official Gazette (Boletín Oficial del Estado). This Ministerial Order came into force on 21 June.
In our Briefing1 about Royal Decree 413/2014, of 6 June, which regulates the generation of electricity through renewable energy sources, cogeneration and waste (“Royal Decree 413/2014”), we explained that the targets for the implementation of electricity production technologies using renewable energy sources, cogeneration and waste, have been quickly and consistently exceeded. As a result, successive reviews of the regulatory framework of such technologies have taken place between 2008 and 2013. According to the Explanatory Memorandum of Royal Decree 413/2014 and of Order IET/1045/2014, the aim of these reviews was to achieve the strict adherence to the principle of “reasonable profitability” and ensure the financial sustainability of the electricity system.
Royal Decree‑Law 9/2013 of 12 July and Law 24/2013 of 26 December, relating to the Electricity Sector, were approved for the same purpose. According to the provisions set out in such regulations, and in Royal Decree 413/2014 as well as in Order IET/1045/2014, the expected new legal and economic regime for electricity production facilities using renewable energy sources, cogeneration and waste, has been established.
Below, we briefly highlight some key aspects of the new economic framework:
- Facilities are classified by reference to various “standard facilities” according to characteristics such as their technology, power and age.
- These “standard facilities” will receive remuneration for the sales of energy valued at market price and, if applicable, an additional remuneration for investment (RI, Remuneration on the Investment) and operation costs (RO, Remuneration on the Operation) which are not covered by the market price.
- The criteria used to calculate such remuneration for each “standard facility” apply throughout its regulatory lifetime. They are intended to reflect the activity of an efficient and well‑managed company, and take into consideration the standard energy sales revenues at market price as well as the investment and standard operating costs.
Within this framework, the aim of Order IET/1045/2014 is to establish the remuneration parameters of the following facilities: (i) pre‑existing facilities, with a right to a feed‑in tariff prior to 14 July 2013 and (ii) other facilities which did not have a right to a feed‑in tariff prior to 14 July 2013 but which might be beneficiaries of a new special remuneration regime. This special remuneration regime, limited to a total maximum power of 120 MW, is applicable to certain installations, subject to various conditions and does not apply to solar thermal, photovoltaic and wind technologies.
- Contents of Order IET/1045/2014
Order IET/1045/2014 consists of eight articles, a number of Additional, Transitory and Final Provisions and eight Annexes. The Annexes describe in detail the new remuneration parameters for existing facilities (mainly, each standard facility by virtue of technology, power and age), and the corresponding new remuneration applicable from 14 July 2013.
The eight Annexes are as follows:
Click here to view table.
The regulatory changes contained in Royal Decree 413/2014, as well as in Order IET/1045/2014, are likely to have a significant negative impact on many owners of affected facilities.
Contentious‑administrative appeals can be filed before the Supreme Court against these regulatory changes. Additionally, actions for financial liability against the State as well as arbitration proceedings under the Energy Charter Treaty may also be brought. There are numerous arguments supporting such legal actions, which will seek to obtain a declaration that these regulatory changes are invalid and compensation for damages.