Public information on the draft royal decree on off-shore renewables deployment in Spain: an urgent analysis

The new regulation for marine wind and marine renewable energies has been launched. Until March 25th, there's a chance to submit comments for the development of a legal framework to achieve the Spanish Government’s goals aiming for up to 3 GW of marine wind and up to 60 MW of other marine renewable sources by 2030.

1. The draft Royal Decree regulating the production of electricity in installations in the sea in locations under Spanish jurisdiction, has been subject to a hearing process until 25 March 2024. This process was anticipated, and through the text, the regime of administrative authorizations applicable to renewable energy installations (not only wind) is developed, including those located in the maritime-terrestrial public domain and the port public domain.

2. Through a competitive bidding process, the following rights will be  envisaged: (a) The economic regime for renewable energies, and (b) the reservation of capacity access to a specific node of the transmission network.

However, these rights will be subject to obtaining the corresponding access and connection permits (the capacity reservation does not grant these access and connection rights, but they will not be subject to the criterion of temporal precedence, and -we add- they will not be exempt from their own guarantees) and the authorizations required for electricity production facilities, as well as the granting of concession rights over the public domain (with a maximum duration of 30 years), a procedure which -strictly speaking- is not linked to the outcome of the auction and which may delay the achievement of the milestones that may be established, and the COD. An expedited process (or at least parallel processing, which is not clear in the draft Royal Decree, despite the press release from the Spanish Ministry for Ecological Transition and Demographic Challenge -MITECO-) for all the permitting process would be desirable.

3. The call for the competitive bidding procedure will be carried out in the following phases:

A) It will be necessary to approve an order from MITECO regulating the competitive bidding procedure. This order may include, among other aspects, the following:

• The maximum power quota to be awarded.
• The area where the installations will be located (in accordance with the POEM approved by Royal Decree 150/2023), and the transport nodes where it is technically feasible to evacuate the energy, subject to a report from REE (TSO), estimating the discharges that could occur over a ten-year horizon and analyzing the possibilities of connection.
• The characteristics of the installations and the participating entities. Regarding the latter, requirements related to legal form, technical solvency, and company experience, size, and other economic-financial aspects may be required. The incorporation of such requirements must take into account the legal framework to prevent market closures prohibited by national and community regulations and case law.
• The parameters and remaining elements that configure the economic regime, which are as follows: (a) deadline for availability of the installation, and where applicable the cases of duly justified extension, (b) start date and maximum delivery period, (c) minimum and maximum number of equivalent annual operating hours, (d) market adjustment percentage, and (e) existence of intermediate control milestones and penalties. However, these parameters may be modified in the resolution convening the competitive bidding procedure referred to in the subsequent letter C).
• The amounts of the required guarantees, which will be proportional to the power for which registration in the electronic register of the economic regime of renewable energies in a pre-assignment state will be requested. These guarantees "will be taken into account" in the amount of the final bond to be deposited for the purpose of public domain concession. The sum of both may not exceed 5% of the budget for works or installations to be carried out.
• Details of the public-private dialogue phase, to which we refer below.

B) A public-private dialogue may be held in which sectors affected by these installations may participate, the purpose of which will be to complete the definition of the characteristics and requirements that installations must meet, as well as the details of the competitive bidding procedure. This possibility, reminiscent of the competitive dialogue already known in the field of public procurement and developed for auctions in France, is appreciated.

C) By resolution of the State Secretary for Energy, the procedure in question will be convened, including (i) the schedule, (ii) procedure details, such as documentation to be submitted, reserve price (maximum economic bid offer price), and risk price (minimum economic bid offer price), which may be confidential (the latter has been the case in the recent onshore renewables auctions). In this regard, it would be advisable to take into account the precedents in the UK regarding the reserve price and the possibility of multiple rounds as has occurred in Germany.

4. The application that receives the highest score will be awarded. Non-economic criteria may be included up to a maximum of 30% of the weighting. They must be related to the project (and should also be proportional) and may be related to (a) design (occupancy ratio, distance to the coast, number of wind turbines, contribution to innovation, etc.), and/or (b) environmental impact (i.e., carbon footprint of its components), (c) socio-economic impact (employment and local, regional, national, and EU value chain - relevant considering the supply chain difficulties and strategic component dependence but may require corresponding analysis from the perspective of domestic trade within the EU -, participation of SMEs, compatibility with other uses, etc.), and/or (d) decommissioning, and/or (e) impact on the safety and quality of electrical supply and maritime safety.

5. Unused capacity will not be released for allocation by the principle of temporal priority. Unused (or unannounced) capacity will be reserved for future tenders.

6. The specific economic regime of each installation will be obtained from its award price, the remuneration parameters associated with the characteristics of the installation, and its participation in the electricity market, as provided for in Royal Decree 960/2020.

7. Finally, we highlight several provisions of interest:

a. The possibility of transferring the ownership of the participation application or the rights awarded, subject to the corresponding authorization and provided that the assignee meets the same capacity or solvency characteristics that may be required.

b. The possibility of withdrawing from the construction of the installation, with loss of rights, expiration of access and connection rights, and execution of guarantees. However, the order resulting from the competitive bidding procedure may establish "other cases". Other cases (already provided for in public procurement regulations) that allow mitigating the assignment of all risks to the promoter should be considered (e.g., unforeseeable or unforeseen circumstances that financially imbalance the project, force majeure, regulatory risks, network congestion, etc.). In Ireland, O&M costs are adjusted for inflation.

c. The possibility of modifying the awarded project, provided that it does not affect the equality, transparency, and competitiveness of the procedure, nor does it imply an increase in the awarded price, that it can be considered the same installation, and that they are not substantial under Royal Decree 1955/2000, and do not have to undergo environmental impact assessment (perhaps it would be sufficient for them not to have to undergo simplified environmental impact assessment).

d. The regime provided for applications for authorization submitted under Royal Decree 1028/2007, which will be archived (except for those referring to non-wind installations of less than 50 MW).

e. The peculiarities of the regime for installations located in non-peninsular territories (relevant considering the degree of maturity of the projects announced a few days ago after the meeting of the Gran Canaria Island Council, following the meeting held last week with the MITECO, the auction to take place before the end of this year, and motivated by their non-participation in the mainland production market), for innovative installations (wind farms below 50 MW and other technologies below 20 MW), and for installations located in the main Spanish Ports.

8. In conclusion, although there will be more opportunities (further hearing procedure before the Council of State), now is the time to actively participate in the elaboration process of this legal framework, taking into account, of course, the experience of our environment in the matter.