- The decree sets a reasonable return of 7.09% for specific-regime installations in 2020–2025.
- It offers a return of 7.398% until 2031 to pre-2013 installations that waive arbitration and lawsuits.
- It regulates grid access and new concessions in areas where coal or nuclear plants close.
On 22 November 2019, the caretaker Council of Ministers approved Royal Decree-law 17/2019, published in the BOE the next day, in force from 24 November. It adopts urgent measures to adapt the remuneration parameters of the electricity system and to regulate some effects of the closure of coal and nuclear thermal plants. It amends the Electricity Sector Act and the consolidated text of the Water Act.
The rule sets the reasonable return of specific-regime installations at 7.09% before tax until 31 December 2025, when the next regulatory period begins. And it offers a special route for renewable, cogeneration and waste plants already operating before 12 July 2013: to keep a return of 7.398% until 2031, in exchange for waiving arbitration and court proceedings and compensation. The decree responds to a context of energy transition, in which the government is preparing the closure of several plants and a greater presence of renewables.
A regulated return
The Spanish system pays renewables with a regulated supplement calculated so that the installation earns a reasonable return, set for six-year regulatory periods. In 2013 and 2014, the government changed that system retroactively, which gave rise to numerous claims by foreign investors before international arbitration tribunals, several with awards against Spain.
The decree seeks to end that litigation with a voluntary offer: holders keep a known return for longer and, in exchange, give up further claims. It applies automatically unless expressly waived before 1 April 2020, and those who start an arbitration after the decree comes into force may qualify if, before 30 September 2020, they end the proceedings and waive compensation.
The closure of plants
The decree also addresses the planned closure of coal and nuclear plants. It introduces rules for renewable energy’s access to the transmission grid in the affected areas, although procedures and requirements will depend on secondary rules from the ministry, and it allows new administrative concessions, for example for water, when earlier ones end because of closure, on the condition of promoting economic, social and environmental projects in those territories.
The government, still in a caretaker role, also extends to 29 February 2020 the deadline for approving the ministerial order that revises the remuneration parameters of the specific regime. It is an example of how the political situation also conditions sector regulation.
What to review
Holders of pre-2013 specific-regime plants should assess with legal and financial advice whether the offer suits them, weighing the value of a stable return against that of a possible award and paying attention to the waiver deadlines. Lenders to those projects should also review the impact on their guarantees and covenants.
Industrial companies and territories affected by plant closures should follow the secondary rules, which will determine the conditions for grid access and new concessions. For consumers, the effect is indirect through the cost of the system. Consult your adviser to assess the specific impact in your case. For household consumers the direct effect is limited, although the cost of the system ends up reflected in tariffs in the medium term.
Regulatory certainty is an asset: anyone investing for the long term needs to know which rules will apply.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
