Energy Spain Newsflash 772022 120029 PM

MEASURES RELATED TO THE ELECTRICITY SECTOR:

DRAFT ORDER ON A CALL OF ACCESS CAPACITY TENDERS AT CERTAIN NODES OF THE TRANSMISSION GRID

Royal Decree 1183/2020, of 29 December, on access and connection to the electricity transmission and distribution grids (RD 1183/2020) sets out the possibility of convening, when certain requirements are met and by means of a ministerial order, access capacity tenders at specific nodes of the transmission grid for new electricity generation facilities that use renewable primary energy sources as well as for storage facilities.

In this context, on 10 June, the Ministry for Ecological Transition and the Demographic Challenge (MITERD) published a draft order announcing a call for an access capacity tender at 17 nodes in the transmission grid. The draft was submitted to a public information procedure for the filing of allegations until 28 June.

The content of the draft order can be accessed here.

PRIOR PUBLIC CONSULTATION ON THE REGULATORY FRAMEWORK FOR THE DEVELOPMENT OF OFFSHORE WIND AND MARINE ENERGY FACILITIES

On 1 June 2022, the MITERD carried out a prior public consultation (consulta pública previa) on the future regulatory framework for the development of offshore wind and marine energy facilities.

The offshore wind energy sector has been boosted over the last decade by major advances for its commercial implementation, which has contributed to an increase in its potential geographical scope and interest in the development of projects along the Spanish coast.

Likewise, in December 2021, the MITERD published the "Roadmap for the development of offshore wind and marine energy in Spain". Among other issues, this Roadmap points out the need to adapt the current regulatory authorisation framework to promote investment in this sector. The Roadmap also sets out that, during the year 2022, the Marine Zoning Instruments (known as POEM according to their acronym in Spain) will begin to be approved as zoning instruments in order to reflect the most suitable areas for the development of these technologies on the Spanish coasts.

In light of the above, the implementation of a new regulatory framework is necessary, particularly if we also bear in mind that the third additional provision of Royal Decree-law 12/2021, of 24 June, suspends the authorisation procedure for these installations until the Government approves such new regulatory framework.

The content of the prior public consultation can be accessed here.

MODIFICATION OF THE TECHNICAL BUILDING CODE (CÓDIGO TÉCNICO DE LA EDIFICACIÓN)

On 15 June 2022, Royal Decree 450/2022, amending Royal Decree 314/2006 of 17 March approving the Technical Building Code (Código Técnico de la Edificación) (CTE), was published in the Official State Gazette (BOE). Among other provisions, the following modifications are noteworthy:

• Some provisions from the relevant Directives issued by the European Parliament and Council on energy efficiency aspects are incorporated into Spanish law.
• A new basic energy saving requirement is introduced in the CTE regarding minimum provisions for electric vehicles charging infrastructures, so that those buildings that meet certain conditions will have to comply with a minimum infrastructure that enables electric charging for vehicles.
• The scope of application of the basic requirement HE 5 relating to the minimum generation of energy from renewable sources is extended in order to include private residential buildings and reduce the threshold of built surface area in buildings subject to all kind of uses for the application of the above mentioned basic requirement.

The content of Royal Decree 450/2022 can be accessed here.

EFFECTIVE ENFORCEABILITY OF THE MECHANISM FOR THE ADJUSTMENT OF PRODUCTION COSTS FOR THE REDUCTION OF ELECTRICITY PRICE IN THE WHOLESALE MARKET

On 9 June 2022, Order TED/517/2022 of 8 June was published in order to set out the effective enforceability of the production cost adjustment mechanism for the reduction of electricity price in the wholesale market as regulated in Royal Decree-law 10/2022, of 13 May, following the decision issued by the European Commission authorising said mechanism.

The purpose of this regulatory instrument, which became enforceable on 14 June, is to reduce the marginal price of electricity in the wholesale markets of the Iberian Peninsula and, ultimately, to promote a reduction in the retail prices borne by final consumers. This mechanism will be applicable for 12 months and in no case may it be extended beyond 31 May 2023.

The content of the Order can be accessed here.

CLARIFICATIONS ON CONNECTION RIGHTS FOR RENEWABLE GENERATION FACILITIES WITH A CAPACITY BELOW 5 MW.

On 9 June 2022, the National Commission on Markets and Competition (CNMC) issued a resolution deciding on an access to electricity transmission and distribution grids' conflict (CFT/DE/146/21). By means of this resolution, the CNMC sets out its criteria relating to the priority of access and connection procedures for those generation facilities with a capacity below 5 MW that are intended to be connected to the distribution grid when the affected transmission grid node is reserved for an access capacity tender.

In this regard, RD 1183/2020 provides for the suspension of the connection requests to the distribution grid for generation facilities whose capacity exceeds 5 MW when the affected transmission node is reserved for an access capacity tender, but does not set out any specific provision for generation facilities with a lower capacity. In the aforementioned resolution, the CNMC concludes that, although the regulation does not specify this as it is unnecessary, requests relating to generation facilities whose capacity is below 5 MW -provided that they are not intended for self-consumption- cannot be resolved until the resolution of the suspended procedures with time priority and, therefore, they shall also be suspended.

The content of the resolution can be accessed here.

MEASURES IN THE ENERGY FIELD INTRODUCED BY ROYAL DECREE-LAW 11/2022 OF 25 JUNE 2022

• The reduction mechanism for the remuneration of the electricity energy production activity associated to those generation facilities which implement technologies that do not emit greenhouse gases introduced by Royal Decree-law 17/2021 of 14 September, is extended until next 31 December 2022.
  
  The access capacity in the fair transition nodes (nudos de transición justa) remains and some clarifications are included regarding the general access capacity tenders as follows. Specifically, if after 12 months as from the date of the resolution issued by the Secretary of State for Energy announcing the access capacity tenders, they have not been convened for any of such nodes, the relevant access capacity will not be released until this is expressly set out by a resolution of the Secretary of State for Energy.
• It is also set out that non-compliance by the holder of the access and connection permits with the commitments relating to the injection of energy into the grid arising from an access capacity tender will not result in the automatic expiry of said permits, provided that the foregoing does not imply non-compliance with the relevant administrative milestones set out in Royal Decree-law 23/2020, without prejudice to the penalties and possible enforcement of guarantees foreseen in the relevant regulations on access capacity tender.

The content of the Royal Decree-law 11/2022 can be accessed here.

MEASURES RELATING TO THE HYDROCARBONS SECTOR:

MEASURES IN THE HYDROCARBONS SECTOR INTRODUCED BY ROYAL DECREE-LAW 11/2022 OF 25 JUNE 2022

• The extraordinary allowance set out by RDL 6/2022 on the retail price of certain energy products and additives is extended until 31 December 2022. All persons and entities that purchase these fuels shall be beneficiaries of this allowance with the exception of the units intended for the activity of private recreational sailing.
• RDL 11/2022 maintains and extends until 31 December 2022 the obligation for wholesale operators of petroleum products with refining capacity in Spain and with an annual turnover exceeding 750 million euros to pay a quarterly non-tax public payment. Wholesale operators who instead, commit to provide a direct discount on sales of petroleum products to consumers, will not be bound to make this payment.
• RDL 11/2022 also extends the term of the gas supply agreements' flexibilization measures introduced by Royal Decree-law 29/2021. These measures shall remain in force until the quotation of the daily product with delivery on the following day at the Virtual Balancing Point (Punto Virtual de Balance), published by the Iberian Gas Market (MIBGAS), remains below 60 €/MWh for ten consecutive daily trading sessions, or until 31 December 2022 at latest.
• A specific line of subsidies is introduced for gas-intensive industry to mitigate the adverse effect of the increase in the cost of gas caused by the invasion of Ukraine and the sanctions imposed on Russia. The beneficiaries of these subsidies may be any kind of companies, regardless of their legal form, which are registered for tax purposes in Spain and which have carried out at least one of the activities of National Classification of Economic Activities (Clasificación Nacional de Actividades Económicas) during 2021 referred to therein, provided that they continue to carry out such activity at the time of the application.

The content of the Royal Decree-law 11/2022 can be accessed here.

THE TAX CORNER:

TAXATION MEASURES INTRODUCED BY ROYAL DECREE-LAW 11/2022, OF 25 JUNE 2022

• VAT's rate associated to energy deliveries is reduced to 5% in the same terms as the decrease previously introduced by Royal Decree-law 12/2021, of 24 June in favour of consumers with a fixed term of contracted capacity below 10 kW, provided that the average price of the wholesale electricity market corresponding to the precedent month has exceeded 45 euros per MWh. This reduction will be in force until next 31 December 2022.
• The reduction of the Special Tax on Electricity (Impuesto Especial sobre la Electricidad) to a 0.5% introduced by Royal Decree-law 17/2021 of 14 September 14 is extended until next 31 December 2022.
• The suspension of the existing Tax on the Value of Electricity Energy Production (Impuesto sobre el Valor de la Producción de Energía Eléctrica) is extended until next 31 December 2022.

The content of the Royal Decree-law 11/2022 can be accessed here.

LATEST TAXATION PRONOUNCEMENTS ON THE POSSIBLE REVERSAL OF THE TAXABLE PERSON FOR VAT PURPOSES IN PHOTOVOLTAIC INSTALLATIONS

The Spanish General Directorate of Taxes has recently clarified in response to several binding rulings that the reverse charge mechanism (whereby the provider of a service does not have to charge VAT to the recipient of the service, so that there is no actual payment of the tax and, therefore, no need to finance it), applies to the execution of design and assembly projects for solar generation installations, given that the elements that make up a solar farm (photovoltaic plants, connection or evacuation lines for the energy produced, energy delivery and transformation centres, generation connection lines and the buildings where they are located) are considered to be buildings, provided that such work:

• are the consequence of contracts directly entered into between the developer and the contractor;
• are carried out as part of a solar farm construction project (or a refurbishment project in the case of installations on the roof or ceiling of an existing building); and
• are considered to be the execution of works (so that it does not apply in the case of supply without subsequent installation of the materials).