Spain to back renewables development through PPAs

0
562

THE SPANISH government has prepared two draft laws to help energy-intensive industrial consumers receive state aid and ease some of the burden of high costs of electricity, while supporting renewables development through power purchase agreements (PPAs).

The proposed regulation defines an energy-intensive consumer as an industrial sector company that has consumed more than 1 GWh annually for at least two of the past three years, with at least 50% of electricity consumed during off-peak hours.

This 50% requirement should not account for power consumption from on-site generation schemes, which some companies may have installed.

For newly-established companies that do not have three years’ worth of utility bills, the draft law offers a way to submit projections on consumption until they accumulate sufficient data.

The consumer profile of each company has to be certified and registered with government authorities for them to qualify for state aid in line with the EU criteria.

The state aid is to come as financial compensation for paying for items such as support for renewable energy and high-efficiency co-generation, or additional costs attached to Spain’s extra-peninsular territories that appear on companies’ electricity bills.

By registering as energy-intensive consumers, companies can recover up to 85% of the costs that typically pay for remuneration rates for renewables.

The registration for state aid comes with strings attached, as energy-intensive consumers have to sign PPAs with a five-year term as a bare minimum covering at least 10% of the annual electricity consumption.

The Spanish ministry of industry, trade and tourism, which drafted the law proposals, has recognised the impact of high electricity costs on industrial sector companies’ ability to stay competitive, but has also acknowledged the needs of renewable energy developers to have revenue visibility for their projects.

To further spur renewables development, the ministry of industry has drafted a second law proposal seeking to create a EUR-600-million (USD 648.6m) reserve fund that will assume PPA risks associated with signing up a registered energy-intensive company as a client.

The fund, called FERGEI (an acronym for Fondo Espanol de Reserva para Garantias de Entidades Electrointensivas), is to be managed by Spanish export credit agency CESCE.

In the first three months of its creation the fund would be worth 200 million euros and is to rise to 600 million euros for the first three years.

In practice, the law will empower the fund to stand behind PPAs with government funds, for example if an energy-intensive company cannot meet its obligations due to insolvency.

Spanish energy-intensive companies have access to a variety of tailor-made PPAs regardless of whether the state intervenes or not.

Earlier this year, the Spanish unit of Engie SA (EPA:ENGI) signed a PPA with an energy platform acting on behalf of large industrial power consumers in Spain and Portugal for the supply of over 400 GWh annually for 11 years.

An additional push from the government will no doubt be attractive for the energy-intensive consumers and renewables developers alike.

According to Spanish energy consultancy AleaSoft, citing sources within the energy-intensive industrial sector, Spanish companies’ electricity bill is higher by EUR 15/MWh compared to their peers in France and Germany.

The access to state aid and government-backed PPAs have the potential to further slash those costs.

Claire Markham, Director of Sustainable and Renewable Energy at Inspired Energy, commented on the news: “This can only serve to promote adding renewable energy onto the grid.

“Further backed by a reserve fund to protect the developer if the Energy Intensive Companies cannot meet their obligations, the PPA can only give the developer a greater confidence to proceed with the project.

“If proven to be successful, the UK should look to implement a similar idea which would promote confidence in the PPA mechanism and drive the net zero agenda forward.”

The story was first reported by Renewables Now