The Spanish government has completed a structural reform of the electricity industry, establishing a new regulatory framework that aims to reduce and control one of the main problems of the Spanish energy sector: the “tariff deficit”. The tariff deficit has been caused by the inclusion of different expenses in the electricity cost and, in part, by generous feed-in tariffs (FITs) paid to some renewable energy installations over the last decade.  The government has recently adopted a series of measures with the purpose of reducing the deficit and replacing the FIT system.

The most recent measure has been the Royal Decree 413/2014, which was approved by the Spanish Government on 6 June 2014 and enacted on 11 June 2014.  The Decree establishes, as foreseen by the Royal Decree-Law 9/2013, the new legal and financial regime applicable to existing installations which generate electricity using renewable energy sources, cogeneration and waste.  The new remuneration regime effectively supplements market income with a regulated level of remuneration, which would permit these technologies to compete on an equal footing in the market.  The previous compensation scheme, which was basically based on payment per MWh generated, has been replaced by this new scheme which provides for standard costs of installations and allows for a "reasonable rate of return". The measures will likely trigger a wave of restructuring, since the figures and the scheme for the return-on-investment according to the previous regime have changed completely.