The Spanish government approves its Regulation on offshore energy production

The Regulation outlines upcoming auctions in Spain, although further details are left to subsequent decisions announcing the competitions.

The key takeaways from the Regulation are:

A joint competitive process (i.e., the auction) will be held to grant various rights needed for offshore projects (which could last up to 30 years maximum)

In particular, the auction will award:

• Economic support for offshore projects (which could last up to 30 years maximum). 

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

• Reserved access capacity to the relevant node in the electricity grid.
• The right to obtain (or, more technically, the “priority 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:

• Grid access permits (using the reserved capacity awarded).
• Sea concessions.
• Regulatory approvals necessary for the facility under Spanish energy law.
• A favourable environmental impact statement.

Steps in the competitive process 

The process will work as follows:

• 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 capacity to be awarded; (2) the relevant areas (within those defined as “of high potential for the development offshore wind energy” in the sea management plans); (3) the technologies and characteristics of the projects; (4) the minimum criteria to be met by projects; (5) the access capacity to be reserved and the affected grid nodes; (6) the sea concession term; (7) the parameters of the economic support scheme (including the deadline to have the facility available and possible extensions, deadline for start of delivery of energy, minimum and maximum equivalent operating hours, market adjustment percentage, other intermediate milestones and penalisations); (8) guarantees to be deposited; (9) award criteria; and (10), if so decided, a mechanism to award the remaining capacity not covered by the bids, even including the possibility of exceeding “moderately” the defined capacity to be awarded. 

• Second, before calling the auction, a “public dialogue” with stakeholders will be held so that the affected parties may submit comments on certain aspects of the process, such as the areas where the projects are to be located, the capacity to be awarded, other aspects on the facilities (such as those regarding compatibility with other uses of the sea, including air navigation safety or national defence), requirements for the projects or the candidates, or the award criteria.
• Third, a second order of the Minister will call the auction. The order calling the auction will decide on whether the feedback received in the “public dialogue” should result in adjustments to the auction rules.

This ministerial order will provide for 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 the final rules on the aspects that were subject to the “public dialogue” phase (such as the access capacity to be awarded).

• Admissibility criteria

1. Bidders may have to fulfil certain requirements (adopt a certain legal form, sufficient technical capacity or experience, a minimum size or other financial aspects).
2. Projects may require certain minimum features (in project design; environmental or socioeconomic impact; future decommissioning; its contribution to the quality and security of electricity supply; its impact on national defence, air and maritime navigation or safety; the protection of human life at sea; protection of the maritime environment and combating pollution; or aspects related to the preservation of the sea following the principle of minimum possible occupation).

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.

• 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. If the order calling the auction so decides, it possible to evaluate and score these criteria separately in subsequent steps (first, non-economic criteria; then, economic criteria).

Before bid classification becomes final, it will be possible to file written arguments. The award decision will then be issued. Losing bids will have the deposited guarantees cancelled.

Other relevant issues

The guarantees provided in this competitive process make it unnecessary to provide a similar guarantee in the subsequent process to obtain the grid access and connection permits.

• Once awarded, withdrawing the project or breaching conditions entails the enforcement of the deposited guarantees (although this can be exempted if the project sponsor can show that this has been caused by a report or decision of a public authority that renders the project impossible) and losing the awarded rights.
• 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).
• 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 regulation states that these facilities will simply require the general regulatory approvals as provided by energy legislation, with the process to obtain the sea (or port) concession being processed separately.
• 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 new Regulation entered into force 26 September 2024.