Spain - The government publishes its draft regulation on offshore energy production for public notice and comment

The deadline to submit comments is Monday 25 March 2024.

The key takeaways from the draft regulation are:

A joint competitive process (i.e., the auction) will be held to grant various rights needed for offshore projects

In particular, the auction will award:

(a)    Economic support for offshore projects. This support will be based on the existing “Economic Regime for Renewable Energy”, a sort of Contract for Difference auction scheme.

(b)    Reserved access capacity to the relevant node in the electricity grid.

(c)    The right to obtain the relevant sea concession.

After the competitive process, winning bidders will need to apply for standard approvals to develop their projects

These are:

(a)    Grid access permits (using the reserved capacity awarded).

(b)    Sea concessions (for a maximum 30-year term).

(c)    Regulatory approvals necessary for the facility under Spanish energy law.

(d)    A favourable environmental impact statement.

Application processes for the sea concession, regulatory approvals and environmental impact assessment are expected to run in parallel. For this reason, the draft sets out a single joint public consultation phase for all.

Steps in the competitive process 

The process will work as follows:

(a)    First, an order from the Spanish Ministry for Ecological Transition and the Demographic Challenge will set out the basic outline for the auction. 

It will decide (1) the maximum capacity to be awarded, (2) the relevant areas, (3) the technologies and features of the projects, (4) the minimum criteria to be met by projects, (5) the access capacity to be reserved and affected grid nodes, (6) the parameters of the economic support scheme (including the deadline to have the facility available and possible extensions, deadline for starting to deliver energy, minimum and maximum equivalent operating hours, market adjustment percentage, other interim milestones and penalties), (7) bid bonds to be paid, and (8) award criteria.

(b)    Second, if the order so decides, before calling the auction it is possible to have a public-private dialogue so that the affected sectors may submit comments on certain aspects of the process. These could include the areas where the projects are to be located, the capacity to be awarded, other aspects of the facilities (such as regarding compatibility with other sea uses), requirements for the projects or the candidates, or the award criteria.

(c)    Third, the Spanish Secretary of State for Energy will call the auction. 

If there has been a public-private dialogue, the decision calling the auction will state whether auction rules should be adjusted based on the feedback received, within the scope allowed by the initial order.

This decision will confirm all final details of the auction: schedule, documents to be produced in the bid, the reserve price (i.e., the price cap) and—if so decided—the risk price (i.e., the price floor)—both of which may be confidential—and further details on the access capacity to be awarded.

(d)    Admissibility criteria

• Bidders may have to fulfil certain requirements (adopt a certain legal form, sufficient technical capacity or experience, a minimum size or other financial aspects).
• Projects may require certain minimum features (in project design, environmental impact, future decommissioning, its contribution to the quality and security of electricity supply, or its impact on maritime safety, the protection of human life at sea, protection of the maritime environment and combating pollution). 

Bids that do not fulfil these requirements or minimum features will be rejected. Before excluding bids, the authority will grant bidders the possibility to provide missing documents or information, and file written arguments.

(e)    Award criteria

Admitted bids will be classified according to the awarding criteria. Non-economic criteria (which could be related to the features of projects mentioned above) may be used for a maximum of 30% of the total score. The economic criteria will be the offered bid price in €/MWh.
Before bid classification becomes final, it will be possible to file written arguments. The award decision will then be issued.

Other relevant issues

(a)    Once awarded, withdrawing the project or breaching conditions entails forfeiting bid bonds and losing the awarded rights.

(b)    Exceptionally, awarded projects may be modified for duly justified supervening reasons, with prior approval from the Spanish Secretary of State for Energy and only within certain limits (e.g., the change cannot entail a different winning bidder or higher winning bid).

(c)    Innovative marine facilities (as certified by the Spanish science ministry and IDAE, a government agency) with an installed capacity of no more than 50MW (for wind projects) or 20 MW (for other renewable technologies) will be exempt from the competitive procedure. The same applies to facilities within state port waters. The draft does not fully delineate how the process would work for these facilities, so there is room for further clarification in the final version of the decree.

(d)    Existing applications for projects that are pending under the regulation that was in force before the 2021 moratorium are discarded (except for applications for wind facilities below 50MW or for facilities based on other technologies, which can proceed).
 

This draft will now be subject to public comment and the Spanish government may still decide to amend it or include additional provisions to cover possible gaps.