Regulation of electricity utilities – power generation

Authorisation to construct and operate generation facilities

What authorisations are required to construct and operate generation facilities?

As per the provisions of articles 111 and 115 of Royal Decree 1955/2000, the construction, expansion, modification and operation of all electricity installations requires the following administrative authorisations:

  • administrative authorisation, if appropriate, in conjunction with the environmental impact study;
  • approval of the execution project; and
  • start-up certificate - the relevant authorities issue the start-up certificate within a period of one month from receipt of the request, having completed the necessary technical inspections and verifications of the project.
Grid connection policies

What are the policies with respect to connection of generation to the transmission grid?

The general policy regarding access to the transmission grid is set forth in article 33 of the LSE, which establishes that the granting of a connection point to the grid must be based on technical security criteria, regularity and quality of supply and sustainability and economic efficiency of the electric system.

The application of these criteria determines whether there is enough power transmission capacity in the grid. The LSE establishes that when evaluating the capacity of the grid it is necessary to evaluate more than the specific connection point to which the facility is to be connected. The analysis must also include other connection points that may be influenced by the connection point where the facility is to be connected, considering current generation facilities and future ones that have already been granted access in a given connection point.

The permit for accessing the grid must be granted by REE as TSO when the connection point is located in the transmission grid, and by the corresponding distributor when the connection point is to be granted in the distribution grid. These permits may be refused only if there is a lack of capacity in the relevant grid, and the refusal must be reasoned and based on the criteria set forth in the first paragraph above.

Note also that Law 15/2012 established a tax on the sale of electricity at a rate of 7 per cent on the total revenues accruing to generators from the electricity generated and incorporated into the grid by each of their facilities.

Note, however, that the CNMC has already proposed a new regulation on access and connection to the grid which is currently being studied and is foreseen to be approved by the beginning of 2020.

Alternative energy sources

Does government policy or legislation encourage power generation based on alternative energy sources such as renewable energies or combined heat and power?

Yes. In general terms, under the Spanish incentive scheme, renewable power generators: sell the electricity they generate into the Spanish wholesale market and receive market price for such sales; and may receive additional regulated payments during their respective regulatory lives.

In addition to financial incentives, other policies that promote the development of renewable energies in Spain are the following:

  • priority of access to the grid - renewable energy generators have priority over other operators to access and connect to transmission and distribution networks; and
  • priority of dispatch of electricity generated in the wholesale market - under equal market conditions, renewable energy generators have priority over other, conventional generators to deliver their electricity in the wholesale market.

Combined heat and power generators also receive market price for their sales plus an incentive, labelled capacity payments, for the availability of the combined heat and power plant.

Climate change

What impact will government policy on climate change have on the types of resources that are used to meet electricity demand and on the cost and amount of power that is consumed?

In July 2017, the Spanish government launched an open consultation process in relation to a preliminary draft bill of a climate change law, which remained open until 10 October 2017. The aim is to respond to EU targets on climate change arising from the Paris Agreement, defining a medium-and long-term framework to secure the transition towards a low-carbon model. Note also that the Spanish government changed on 2 June 2018, and the new Ministry for Ecological Transition (MINET (formerly the MINETAD)) undertook to present the new draft bill for the Law on Climate Change and Energy Transition before the end of 2018. The draft bill was finally approved by the Spanish government on February 2019, but the parliamentary procedure to approve the law was been stopped by the dissolution of the parliament in September 2019 and the call for new elections. So the parliamentary procedure related to the draft bill for the Law on Climate Change will restart in the next parliamentary term.

The future law on climate change will introduce EU’s targets for regarding emissions and renewable energy sources that must be met by 2030. In particular, greenhouse gases are to be reduced by 26 per cent in comparison with 2005, and at least 27 per cent of total EU energy consumption must come from renewable sources.

The specific contribution of Spain to meeting these new targets will be established in the coming law, although Spain always promotes clean-energy initiatives. The increasing importance of renewable energies for meeting electricity demand in Spain can be shown in the data provided by REE in its Annual Report for 2018:

  • 19.8 per cent of the total installed capacity in Spain is wind power electricity;
  • 13.7 per cent comes from hydropower facilities (including both mini-hydros (up to 10MW) and larger facilities);
  • solar photovoltaic energy amounts to 3 per cent of total installed capacity; and
  • solar thermal accounts for 1.8 per cent.

Furthermore, on 22 February 2019, MINET approved the Plan Nacional de Energía y Clima (PNIEC), which establishes several policies of MINET to achieve EU objectives and a proper transition from a coal-based energy to a renewable-based energy mix. Among other consequences, these commitments will entail a development of the self-consumption regime, which promotes the installation of small generators that produce renewable energy in venues where there is the capacity to produce energy. In fact, on 5 April RD 244/2019 was approved to foster consumption facilities.


Does the regulatory framework support electricity storage including research and development of storage solutions?

The regulations applicable to energy storage projects do not differ from the general framework. Storage facilities (both large-scale and end-user (batteries, etc)) depend on the power plant of which they form part. Therefore, the relevant authorisations and legal framework are included within the authorisation process for power plants.

Government policy

Does government policy encourage or discourage development of new nuclear power plants? How?

The current debate in Spain focuses not on whether new nuclear plants should be developed, but on the extension of existing plants beyond their initial 40 years of operational life. There is no common policy in this regard among the different political parties. While the former (right-wing) Spanish government pursued the renewal of existing licences, the current (left-wing) Spanish government has announced its intention to take steps towards closure of nuclear plants (or the non-renewal of their licences). A change in the political affiliation of the government therefore impacts the renewal policy of existing nuclear power plants. In addition, the Spanish government does not have a majority in the Spanish Congress and so has to reach agreements with other political parties which could affect nuclear power plant policies.

There are currently five operational nuclear power plants in Spain, two of which each have two light-water reactors. The last plant entered into operation in 1988. The renewal process lasts approximately three years and the first renewals for some of the nuclear plants were scheduled to be requested during 2017 and 2018.

The debate between operators and the Spanish government revolved around the conditions on which extensions should be granted. Nuclear power generators argued that the current tax scheme for nuclear power plants is disadvantageous and discourages the filing of renewal applications. According to the PNIEC, the current Spanish government and owners of nuclear plants in Spain agreed to close the nuclear plants through a gradual process. All nuclear plants are expected to be shut down by 2035 and, as stated in the PNIEC, four out of the seven reactors will be closed by 2030.

Regulation of electricity utilities – transmission

Authorisations to construct and operate transmission networks

What authorisations are required to construct and operate transmission networks?

The authorisations to construct and operate transmission networks are similar to those described in question 3.

Transmission (and distribution) activities receive a regulated remuneration based on the costs of building, operating and maintaining the installations. Currently, and until the end of 2019, the return rate of transmission and distribution assets is determined by reference to market yields for the 10-year Spanish government bond calculated as the average of the months of April, May and June of 2013 plus a spread of 200 basis points. The return rate will be reset and adjusted if needed in 2020.

Eligibility to obtain transmission services

Who is eligible to obtain transmission services and what requirements must be met to obtain access?

Pursuant to article 52 of Royal Decree 1955/2000, generators, auto-generators, distributors, traders, qualified consumers, and those other non-national entities authorised to carry out transit of electricity between large networks are entitled to access the transmission grid.

Apart from fulfilling the corresponding requirements and capacities to become an operator (technical, economic and legal capacities), access to the grid itself does not depend on any specific condition and can be denied only owing to lack of capacity in the connection point. Such lack of capacity must be exclusively based on security, regularity or quality grounds.

Government transmission policy

Are there any government measures to encourage or otherwise require the expansion of the transmission grid?

Pursuant to article 34 of the LSE and articles 8 et seq of Royal Decree 1955/2000, the planning of the transmission grid is approved by the government with the involvement of the autonomous communities, REE as TSO and the National Commission for Markets and Competition (CNMC). The planning includes a development plan for the transmission infrastructures, which is approved every four years. This development plan is binding and each year MINET uses it to approve the yearly investment planning of transmission infrastructures to be developed by the TSO. The TSO is then obliged to execute the approved investments.

Rates and terms for transmission services

Who determines the rates and terms for the provision of transmission services and what legal standard does that entity apply?

Pursuant to RDL 1/2019, from 1 January 2020 onwards the CNMC approves the regulations to establish access fees and tolls and charges for the use of transmission and distribution networks. Access fees, tolls and charges must be set in accordance with the methodology established by the CNMC. The tolls approved by CNMC are the same for the whole Spanish territory and do not include any taxes. If there are specific taxes of the autonomous communities that affect activities or facilities needed for the supply of electricity, a supplement may be included to cover the extra costs arising from such levy.

Note, however, that until now it has been the MINET the one approving the regulations in this regard. However, this was subject to a great degree of controversy between the CNMC and the former MINETAD with CNMC claiming (and challenging) that pursuant to Spanish law this was a competence of the CNMC. The new Spanish government decided to give back these competences to the CNMC by approving RDL 1/2019.

Entities responsible for grid reliability

Which entities are responsible for the reliability of the transmission grid and what are their powers and responsibilities?

REE is in charge of the reliability of the transmission grid as TSO of the electricity system. Its principal responsibility is to ensure the continuity and security of supply and proper coordination between the transmission and generation systems.

REE’s powers include taking any action necessary to properly carry out its responsibilities, including:

  • forecasting the level of guaranteed supply with powers to temporarily close facilities to guarantee supply;
  • coordinating and amending maintenance plans for transmission facilities to ensure their compatibility with generation facilities and an adequate availability level to guarantee the security of the system;
  • issuing operating instructions for the transmission grid; and
  • applying transmission network access fees and tolls.