Use the Lexology Getting The Deal Through tool to compare the answers in this article with those from other jurisdictions.

Legal framework

Policy and law

What is the government policy and legislative framework for the electricity sector?

Spain’s electricity sector policies and legal regime are primarily governed by the European Union through Directive 2009/72/EC concerning common rules for the internal market in electricity. The energy policies behind this Directive are mainly focused on ensuring the security and safe supply of energy at the lowest possible cost, boosting energy efficiency, ensuring the functioning of the energy market and promoting the interconnection of energy networks.

As stated in article 1 of Law 24/2013, of 26 December, on the Electricity Sector (LSE), the regulations of the electricity sector have the aim of guaranteeing the supply of electricity and adapting it to the needs of consumers in terms of security, quality, efficiency, objectivity and transparency at the lowest cost. The LSE also establishes the principle of economic sustainability of the system, meaning that all costs of the electricity system have to be covered by the income the system generates.

At state level, the above-outlined policies and legal regime are mainly implemented through:

  • the LSE itself;
  • Royal Decree 1955/2000, of 1 December, on regulation of transmission, distribution, commercialisation, supply and authorisation procedure for electricity facilities (Royal Decree 1955/2000);
  • Royal Decree 900/2015, of 9 October, regulating administrative, technical and economic types of electricity supply and generation with self-consumption (Royal Decree 900/2015);
  • Royal Decree 2019/1997, of 26 December, organising and regulating the electricity production market; and
  • Royal Decree 413/2014, of 6 June, on electricity generation by means of renewable, cogeneration and waste facilities (Royal Decree 413/2014).

Most autonomous communities have also passed legislation developing several issues of state legislation in relation to the authorisation process in their territories.

Town councils also have their own regulations regarding the issuance of works and activity licences.

Environmental and town planning regulations (which are mainly developed at autonomous community and town council levels) also have to be taken into consideration when developing an electricity project.

2Organisation of the market

What is the organisational structure for the generation, transmission, distribution and sale of power?

Article 8 of the LSE establishes the general framework for the functioning of the electric system, which can be summed up as follows:

  • electricity generation is a liberalised activity carried out by private operators that sell the electricity generated to the pool at market prices or to specific customers by means of bilateral agreements (power purchase agreements);
  • even though generation of electricity is a liberalised activity, there are certain policies that encourage the use of specific generation sources:
  • an additional regulated remuneration for renewable projects (see question 5 below); and
  • subsidies for purchasing and using Spanish coal;
  • system operation, market operation, transmission and distribution activities are considered regulated activities for the purposes of the unbundling regulations:
  • transmission is carried out under a single transmission agent and system operator (TSO) scheme. Red Eléctrica de España, SA (REE) is the sole TSO for the Spanish electricity system. Among other duties, REE is responsible for guaranteeing the continuity and security of the electricity supply, ensuring proper coordination between generators and the transmission and distribution networks, and operating and managing the transmission grid. REE is a company partially owned by the state (20 per cent). To guarantee the independence of REE, the LSE establishes certain limitations on its shareholders and voting rights: maximum shareholding is limited to 5 per cent of share capital and voting rights cannot be exercised over 3 per cent; if the shareholder has interests over 5 per cent in other entities operating in the electricity sector, their voting rights in REE are limited to 1 per cent;
  • OMI-Polo Español, SA (OMIE) is the electricity market operator. It manages the wholesale electricity market for the Iberian Peninsula (Spain and Portugal), where market agents trade the amounts they need (MWh) at transparent prices. OMIE also carries out the invoicing and settlement of the energy traded on these markets and oversees the corresponding financial settlements. In addition, OMIP - Iberian Energy Market Operator (Portuguese Division), SGMR, SA - manages the futures market (forward and derivatives) on the Iberian Peninsula;
  • third-party access to the transmission and distribution network is guaranteed on the technical and economic conditions set forth in the LSE and its implementing regulations (see question 4); and
  • lastly, trading is also a liberalised activity and customers are free to choose their supplier. Pursuant to EU Directives, from July 2009 onwards individual entities have no longer been allowed to bundle distribution and supply. The trader is the entity with a commercial relationship with the final customer and pays the access fees to use the transmission or distribution network.

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.

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?

The Spanish government launched an open consultation process in relation to a preliminary draft bill of a climate change law. This process 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)) has undertaken to present the new draft bill for the Law on Climate Change and Energy Transition before the end of 2018.

The future law on climate change will introduce the EU targets for 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 2016: 22.8 per cent of total installed capacity in Spain is wind power electricity and 20.3 per cent comes from hydropower. Solar photovoltaic energy amounts to 4.4 per cent of total installed capacity, with solar thermal accounting for 2.3 per cent. Renewable energies increased their overall share in electricity demand coverage from 36.9 per cent in 2015 to 41.1 per cent in 2016.

Storage

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 Spanish government (left-wing) 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 that could also 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. Even though the current Spanish government is against extending the life of existing nuclear plants, the political situation together with the approach of generators requesting incentives makes the final outcome in terms of whether extensions will ultimately be granted highly unpredictable. In fact, the first renewal request from the oldest nuclear plant in Spain (Santa María de Garoña) was denied by the former Spanish government (through the Ministry of Energy, Tourism and Digital Agenda (MINETAD) currently the MINET), with the former minister blaming political uncertainty given the opposition of other political parties and disagreement between the two shareholders of the plant in relation to whether the plant should continue operating.

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 also 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?

The MINET 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 MINET 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.

MINET sets access fees and tolls on an annual basis and can review them whenever there are circumstances that affect the regulated costs of the system or the calculation methodology.

Note however that the determination of these fees and rates was subject to a certain 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 (through the MINET) seems to be taking steps in favour of the request of the CNMC, but the final outcome and whether this is finally determined by the CNMC is still to be seen.

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.

Regulation of electricity utilities – distribution

Authorisation to construct and operate distribution networks

What authorisations are required to construct and operate distribution networks?

The authorisations to construct and operate distribution networks and the distributor remuneration regime are similar to those described in questions 3 and 9.

Access to the distribution grid

Who is eligible to obtain access to the distribution network and what requirements must be met to obtain access?

The answer provided in question 1o in relation to the transmission network applies, mutatis mutandis, to this question.

Government distribution network policy

Are there any governmental measures to encourage or otherwise require the expansion of the distribution network?

Pursuant to the provisions of article 40 of the LSE, the obligations of distributors include extending the distribution facilities to meet new electricity supply demand when necessary. Distributors must also file their annual and multiannual investment plans with MINET, which must contain the projects to be executed and their technical features, the execution schedule and the estimated budget. Such investment plans are approved by MINET and must be executed by the distributors.

Pursuant to the provisions of article 41 of Royal Decree 1955/2000, the obligations of electricity distributors include extending the distribution facilities within the geographical scope of their authorisation to meet new electricity supply demand when necessary. Where there are several distributors in a given area and none of them decides to undertake expansions to serve new customers, the administration will determine which of these distributors should take responsibility, taking into account their individual conditions based on criteria of lower costs and higher economic rationality.

Rates and terms for distribution services

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

The answer provided in question 12 in relation to the transmission network applies, mutatis mutandis, to this question.

Regulation of electricity utilities – sales of power

Approval to sell power

What authorisations are required for the sale of power to customers and which authorities grant such approvals?

The sale of power to customers is carried out by traders. Trading activities are subject not to a prior authorisation regime but to a prior notification to MINET of the start-up of the activities. These notifications must include a responsibility pledge stating that the trader fulfils all the requirements to carry out the activity (including unbundling obligations, technical capacity and fulfilment of wholesale market rules).

If the trading activities are to be carried out only in a specific autonomous community, such notice must be provided to the administrative authorities of the autonomous community instead of to MINET.

Power sales tariffs

Is there any tariff or other regulation regarding power sales?

In Spain we can distinguish between power sales on the free and regulated markets. On the free market, consumers can choose their trading company and both parties freely agree the price of the electricity. However, some specific consumers can qualify for the regulated market, with small consumer prices (PVPC).

In both markets consumers will pay the corresponding access fees to the transmission and distribution networks as well as the corresponding taxes. Thus, the difference lies in the price paid for the electricity itself.

Questions 20 and 21 further develop the main features of the wholesale market and the PVPCs.

Rates for wholesale of power

Who determines the rates for sales of wholesale power and what standard does that entity apply?

OMIE is the electricity market operator. It manages the wholesale electricity market for the Iberian Peninsula (Spain and Portugal), where market agents trade the amounts they need (MWh) at transparent prices. OMIE also carries out the invoicing and settlement of the energy traded on these markets and oversees the corresponding financial settlements.

Market price is settled through daily and intra-daily auctions carried out in the wholesale or spot market. Daily auctions are carried out with the purpose of covering the electricity demand for the following day (24 auctions to cover the 24-hourly bands of the following day). In turn, the purpose of intra-daily auctions is to correct any deviations in the result of the daily auctions (unexpected increases or decreases in electricity demand or supply produced by meteorological circumstances, grid congestion, problems with selected generation units, and so on).

These auctions are inverse. In other words, offers are matched depending on their price - from low to high - until the entire demand is completely covered for the relevant hourly band. The final matched offer marks the price for all the previously matched offers (‘marginal price’), despite the prices of later offers being lower than the marginal offer. The marginal price is basically the market price for each auction.

Public service obligations

To what extent are electricity utilities that sell power subject to public service obligations?

Pursuant to article 17 of the LSE and Royal Decree 216/2014, PVPCs are the maximum prices that reference traders (those obliged to supply at PVPC) can charge for the electricity.

Consumers that can qualify for PVPCs are those with supply points with a voltage lower than 1kV and with a contracted power of less than or equal to 10kW. The PVPC is calculated taking into consideration electricity generation costs, access fees and trading costs.

In addition, in 2009 the Spanish government created a discount rate for certain vulnerable consumers, who are generally defined as falling into at least one of the following categories: having a contracted power of less than 3kW in their main residence; being at least 60 years old and having a retirement, invalidity or widow’s pension according to the social security system; being a ‘numerous family’ (with three or more dependent children); or being part of a family all of whose members are unemployed.

The discount rate is calculated as a discount of 25 per cent on the PVPC and vulnerable consumers have the right to be supplied with electricity under these special conditions.

Royal Decree 897/2017 develops the vulnerable consumer concept, including income thresholds for determination of vulnerable consumers. Certain mechanisms are also established to avoid cutting the supply to specific consumers at risk of social exclusion.

Regulatory authorities

Policy setting

Which authorities determine regulatory policy with respect to the electricity sector?

Broadly speaking, at state level, MINET is in charge of proposing and executing government policies in relation to energy.

Among other functions, MINET is responsible for adopting the necessary measures to secure the supply of electricity and the economic and financial sustainability of the electricity system. The establishment of the National Energy Plan and of an economic regime for those facilities entitled to regulated remuneration are also part of MINET’s duties. Furthermore, MINET’s role includes granting the relevant authorisations for facilities: with an installed capacity of more than 50MW; when they affect the territorial scope of more than one autonomous community; and when they are off shore in the territorial sea.

Autonomous communities are in charge of developing basic state-level legislation. They also grant the necessary authorisations when the electric infrastructure solely affects their territory, unless such authorisations are expressly reserved to MINET as explained in the above paragraph.

At municipal level, town councils are in charge of granting the necessary works and activity licences for the installation of the facilities.

The CNMC is the independent regulator in charge of supervising and controlling the proper functioning of the electricity sector. The CNMC also oversees the degree and effectiveness of market openness and competition in both the wholesale and retail markets. The CNMC has been vested with several functions for these purposes, the main ones being: consultancy functions (it has to issue obligatory reports in relation to regulations, authorisation, amendment or dismantling procedures for electric installations, energy planning, economic regime, quality of supply, etc); conflict resolution (access to the network); and imposing disciplinary measures.

Scope of authority

What is the scope of each regulator’s authority?

See question 22.

Establishment of regulators

How is each regulator established and to what extent is it considered to be independent of the regulated business and of governmental officials?

The Spanish electricity regulator is the CNMC, which, according to article 3 of Law 3/2013, must act with independence from any commercial or business interest in pursuit of its objectives.

In addition, article 3 of Law 2/2013 establishes that the personnel or any members of the CNMC shall not request or accept instructions from any public or private entities.

Note also that the government appoints members of the council of the CNMC upon a proposal from MINET. The nominee must appear before the corresponding commission of the Spanish Congress and its appointment may be vetoed by an absolute majority of said commission. The appointment is made for six years and cannot be extended. The members of the council are partially renewed every two years.

This appointment mechanism has been criticised by several sectors, arguing that it does not fully guarantee the independence of the members of the council.

Challenge and appeal of decisions

To what extent can decisions of the regulator be challenged or appealed, and to whom? What are the grounds and procedures for appeal?

Authorisations, permits and concessions, and any administrative resolutions may be challenged in an administrative proceeding before either the administrative authority that granted them or the relevant superior administrative body. They can subsequently be challenged before the competent courts, which may be the Superior Court of Justice of an autonomous community, the Supreme Court, or lower courts, depending on the specific administrative resolution being challenged.

Acquisition and merger control – competition

Responsible bodies

Which bodies have the authority to approve or block mergers or other changes in control over businesses in the sector or acquisition of utility assets?

MINET is in charge of reviewing acquisitions or other changes in control over businesses in the electricity sector. However, the CNMC has temporarily taken responsibility for this function of MINET until the latter creates the relevant body to assume it.

It is also necessary to obtain a facility transmission authorisation from MINET (or the relevant autonomous community) for the direct transfer of any electricity installation, and several autonomous communities have also enacted legislation requiring an authorisation for the indirect transfer of electricity facilities (wind farms). See question 27 for further analysis.

Review of transfers of control

What criteria and procedures apply with respect to the review of mergers, acquisitions and other transfers of control? How long does it typically take to obtain a decision approving or blocking the transaction?

The Ninth Additional Provision of Law 3/2013 establishes the obligation to notify MINET upon either of the following events:

  • acquisition by companies that carry out regulated activities (such as transmission or distribution of electricity) of stakes in other companies or assets, which may have a significant impact on the development of the activities of the transmission or distribution companies owing to their value or other circumstances. Such acquisition could be made directly or indirectly, in the latter case through other companies controlled by the regulated companies; and
  • acquisition of shares of transport or distribution companies, or of shares of companies that carry out such regulated activities indirectly, through companies under their control.

In addition, if the transaction implies a real and sufficiently serious threat to the guaranteed supply of electricity within the scope of the companies with regulated activities, conditions related to the exercise of such activities may be imposed.

As said before, the CNMC has temporarily taken responsibility for this function of MINET. The notification period for acquisitions is within 15 working days of the acquisition taking place.

On the other hand, article 34 of Royal Decree Law 6/2000 establishes limits on the holding of stakes in the main operators (production and supply) of the electricity system. The CNMC publishes an annual resolution establishing the main operators. If a shareholder holds direct or indirect stakes in two or more electricity main operators, limits as to voting rights and appointment of directors in such operators will apply.

In addition, article 133 of Royal Decree 1955/2000 establishes the need for prior authorisation for the direct transfer of electricity generation assets. Royal Decree 1955/2000 does not establish the need to obtain authorisation for an indirect transfer (eg, by selling shares of the project company) of a renewable facility.

Several autonomous communities (eg, Catalonia and Castilla-León) have also enacted legislation that establishes a requirement to obtain authorisation for both direct and indirect transfers of facilities. If a given autonomous community has not enacted any specific legislation in this regard, Royal Decree 1955/2000 will apply in said autonomous community. The usual term to obtain this authorisation is three months (in some autonomous communities it may be one month), with authorisation considered denied if the corresponding authority provides no answer. Upon approval, the applicant will have a term of six months to transmit ownership of the facility. The authorisation will expire after this period. The applicant must notify MINET or the autonomous community of the effectiveness of the transfer within one month after it becomes effective.

Prevention and prosecution of anti-competitive practices

Which authorities have the power to prevent or prosecute anti-competitive or manipulative practices in the electricity sector?

The CNMC is the public authority in charge of preventing and punishing anticompetitive practices.

Determination of anti-competitive conduct

What substantive standards are applied to determine whether conduct is anti-competitive or manipulative?

Spanish law mainly identifies the following practices as anticompetitive or manipulative:

  • concerted practices with the purpose of preventing, restricting or distorting competition in the national market, such as:
  • fixing of price or commercial terms;
  • limits or controls over production, distribution, technical development or investments; and
  • market sharing;
  • abuse of a dominant position, including among other actions:
  • imposing unfair prices or commercial terms;
  • limiting production, distribution or technical development to the detriment of consumers or other companies;
  • unjustified refusal to satisfy demand for products or services; and
  • applying unequal terms for equal services in commercial relationships, thereby placing some competitors at a comparative disadvantage.

Preclusion and remedy of anti-competitive practices

What authority does the regulator (or regulators) have to preclude or remedy anti-competitive or manipulative practices?

The CNMC is vested with powers to investigate anticompetitive practices, initiate infringement proceedings and impose the relevant sanctions and remedies.

International

Acquisitions by foreign companies

Are there any special requirements or limitations on acquisitions of interests in the electricity sector by foreign companies?

Pursuant to the Ninth Additional Provision of Law 3/2013, when the acquisition is carried out by entities of states that are not members of the European Union or the European Economic Area, if MINET considers that there is a real and sufficiently serious threat to the guaranteed supply of electricity within the scope of the acquirer’s activities it may establish conditions relating to the exercise of the activity of the companies subject to the transaction, as well as certain specific obligations that may be imposed on the acquirer to ensure compliance with competition laws.

Authorisation to construct and operate interconnectors

What authorisations are required to construct and operate interconnectors?

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

Interconnector access and cross-border electricity supply

What rules apply to access to interconnectors and to cross-border electricity supply, especially interconnection issues?

Interconnectors and cross-border electricity supply are regulated at European level by means of Regulation (EU) No. 347/2013 of the European Parliament and of the Council of 17 April 2013 on guidelines for trans-European energy infrastructure. Regulation 347/2013 establishes the requirements for Projects of Common Interest (those projects necessary to implement the energy infrastructure priority corridors and areas set out in Annex 1 of the Regulation). Spain is involved in the priority electricity corridor of the North-South electricity interconnections in western Europe (NSI West Electricity).

There are currently six projects in which Spain is involved and which have been granted the status of Projects of Common Interest: projects on the Spanish-French border (Arkale Substation); Project Bahía Vizcaya; and several projects across the central Pyrenees.

The interconnector capacity is sold through different auctions conducted by REE in the case of interconnectors with France and Morocco, and by OMEL for interconnectors with Portugal.

Transactions between affiliates

Restrictions

What restrictions exist on transactions between electricity utilities and their affiliates?

As explained, companies carrying out transportation and distribution activities are required to have such activity as their exclusive corporate purpose, and a group of companies carrying out transport or distribution activities cannot carry out generation or trading activities either directly or through companies within their group of companies, unless they fulfil several unbundling obligations established in the LSE (keep separate accounting for each activity; maintain different management for each activity; keep commercially sensitive information secret from other companies within the group; establish a group code of conduct to fulfil unbundling obligations; and so on).

Enforcement and sanctions

Who enforces the restrictions on utilities dealing with affiliates and what are the sanctions for non-compliance?

MINET, relevant authorities of the autonomous communities and the CNMC enforce restrictions and may impose sanctions for any infringement, each of them within the scope of their respective competences. Sanctions can include not only fines but also revocation of authorisations or disqualifications from carrying out the activity.

Update and trends

Update and trends

Are there any emerging trends or hot topics in electricity regulation in your jurisdiction?

On 1 June 2018, the Spanish government has changed in favour of the socialist party. The arrival of a new government gives reason to expect changes in energy policies and, specifically, in the renewables sector at the expense of other more polluting generation technologies (nuclear, coal, etc) in line with EU policies and objectives. The new government intends to push forward important reforms to promote investment, research and development in renewable energies. Spain’s new government has already made sure to communicate the shift in climate and energy policy to institutions and members of the EU, aligning with the European socialist parties in these issues, and pushing with them for the 32 per cent share of renewables in the total energy of the Union by 2030.

This, together with the positive economic environment in Spain for the past two years, and with the fact that many renewable technologies are on a degree of maturity that allows profitability without needing regulated incentives, will most likely result in the increase of the investments and the further development of renewable energies in Spain during the coming years.