OM ETU/315/2017 & Resolutions of April 10, 2017. New renewables call in Spain
Legal flash - Energy
April 12, 2017
After publishing Royal Decree 359/2017 of March 31, establishing a call to award the specific remuneration regime, the Spanish government has enacted Ministerial Order ETU/315/2017, of April 6, approving procedural rules for participating in the second call for new facilities and the economic regime applicable to this auction.
The resolutions approving the first auction for May 17, 2017, for a total 2,000 MW and the specific procedural details to submit a bid were published on April 12, 2017.
OM ETU/315/2017, of April 6, establishing the procedure to assign a specific remuneration regime in the call for new renewable energy generation facilities under Royal Decree 359/2017, of March 31, and approving the remuneration parameters has been published in the Spanish Official Gazette.
This complex regulation sets out the basis of the procedural rules for participating in the new auction bid scheme to be called in a later resolution and establishes the remuneration parameters under the principles laid down in Act 24/2013, of December 26, on the electricity sector, and Royal Decree 413/2014, of June 6.
[*] Main aspects
[*] Standard remuneration parameters and bid matching methodology
Under Act 24/2013, of December 26, on the electricity sector, and Royal Decree 413/2014, of June 6, the remuneration regime for future plants must be determined by a specific royal decree and a ministerial order, which would call for a public auction and set the bidding conditions, the capacity and the remuneration parameters. The first renewables auction was established in 2015 for biomass and wind technologies.
The OM ETU/315/2017 is part of a more ambitious and complex second renewables package approved after the entry into force of Royal Decree 413/2014. Its purpose is to establish an auction procedure to award the specific remuneration regime to solar PV, wind and other renewable energy facilities for an overall power of 3000 MW. The bidding dates and specific procedural details are left to subsequent resolutions to be approved by the Secretary of State for Energy.
On April 12, the first auction bid under OM ETU/315/2017 were published by resolution of the Secretary of State for Energy of April 10, 2017. The first auction will take place on May 17, 2017 for 2,000 MW capacity, but filing must be completed by May 11, 2017.
[*] Awardees are free to choose the number, power and location of the projects to complete the total power awarded. They will be entitled to request registration of as many facilities as the awarded power may allow.
[*] Strict deadlines apply to the (i) application to the Specific Remuneration Regime Registry (RRRE) in pre-assignment status (45 days); (ii) identification of the projects bound to the power awarded (6 months from date of RRRE registration); (iii) obtaining of the administrative authorization (12 months from the date of RRRE registration); (iv) commissioning date and final RRRE registration (December 31, 2019).
[*] The bid bond will be €60/kW. Breach of the above deadlines may lead to enforcing the bond. Although OM ETU/315/2017 does not establish any specific mitigation factors for potential bond seizure, section 44.5 of RD 413/2014 sets out that the authority may decide not to enforce the bond “if the causes hindering the project are not directly or indirectly linked to the bidder.”
[*] The specific remuneration regime will apply for 25 years of useful regulatory life. Also, reasonable profitability during the first regulatory period is expected to be 7.503%.
[*] The first auction under this second renewables call has been approved for a total power of 2,000 MW by Resolutions of 10 April 2017 establishing (i) the date to hold the auction, May 17, 2017, and (ii) procedural details and deadlines for tenderers to take into account. The deadline to submit documents is May 11, 2017, at 13:00.
[*] Tenderers entitled to participate in the auction must submit their bids with the percentage of reduction over CAPEX. Minimum and maximum reduction percentages have been approved in the call to discard risky or overexposed tenders.
[*] Under Resolution of April 10, 2017, the maximum percentage of reduction for wind technology will be 63.43%, for solar PV technology 51.22%, and for other renewables 99.99%. No minimum percentage is provided.
[*] Cost of the auction, to be shared by all final awardees, will be 0.08€/kW.
Standard remuneration parameters and bid matching methodology
The standard remuneration parameters of the IT-codes of reference for 2017, 2018 and 2019 (applicable from January 1, 2017) are established in Annex I of OM ETU/315/2017:
The estimated pool price and pool price annual floors and ceilings are the following:
The value of the reasonable profitability to be reached for the first period is fixed in 7,503 %. These parameters are subject to revision, in the terms established in Section 20 of RD 413/2014.
The tenders’ matching methodology is explained in OM ETU/315/2017 as follows:
Reasonable profitability for the first period is set at 7.503%. These parameters are subject to revision under the terms established in Section 20 of RD 413/2014.
The tenders matching method is explained in OM ETU/315/2017:
First, remuneration for investment (Rinv) for the IT code for a facility commissioned in 2019 will be calculated for every bid submitted, using the percentage of reduction of the standard CAPEX and standard remuneration parameters of the IT-code of reference in the following formula:
[*] Second, the unitary overrun for the electricity system will be calculated for each bid as the relation between remuneration to investment and the equivalent number of hours of operation of the IT-code of reference for 2019.
[*] Third, the bids will be listed from lower to higher unitary overrun value, regardless of the tender’s technology. The tenders will be awarded in that order until total auctioned power is reached. The last awarded offer will determine the marginal unitary overrun value resulting from the auction, which will determine the Rinv awarded.
[*] Fourth, remuneration to investment of each of the awarded tenders will be calculated by multiplying the marginal unitary overrun value resulting from the auction times the number of equivalent hours of operation of the IT code of reference for 2019. Percentage of reduction over CAPEX will also be calculated.
[*] Finally, the entity entitled to manage and carry out the auction (Spanish “OMIE”) will determine (i) the total power awarded; (ii) the marginal unitary overrun value of each of the IT codes of reference; and (iii) the percentage of reduction over CAPEX for each of the IT codes of reference.
Luis Pérez de Ayala
Juan Carlos Hernanz
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 This first bond covers only the right to take part in the process and the obligation of awardees to apply for registration in the Remuneration Registry, and its scope is different from the final bond to be placed by the awarded bidders once the process is finished. Section 16 of OM ETU/315/2017 sets out that this last bond will be the same €60 per kW.
RinvITR_j,a is the Remuneration to investment of the IT-code of reference, “j” the year of final commissioning ‘a’, expressed in €/MW, as worked out in section 1 of OM ETU/315/2017 Annex; RinvIT j,a is the Remuneration to investment of the IT for the year of final commissioning ‘j’ , expressed in €/MW; RedITR_j is the Percentage of reduction of the CAPEX of the IT-code of reference ‘j’, expressed in an amount per 1; mITR_j,a is the Coefficient applicable to work out the remuneration to investment of the IT linked to the IT-code of reference ‘ j’ for year of commissioning ‘a.’ If a negative result is reached, the Rinv value will be 0.