Accessing and connecting to transmission and distribution grids are, without a doubt, one of the key elements for making it possible to promote electricity generation installations with renewable technology (both large installations and distributed generation) and, therefore, to comply with commitments undertaken by Spain within the framework of the Paris Accord to reduce greenhouse gas emissions or to increase the percentage of renewable energy in final energy consumption.

Article 33 of the Spanish Electricity Sector Law (“LSE”) regulates this matter, although its eleventh transitional provision conditions its effective application upon the entry into force of the royal decree approving the criteria for granting access and connection permits envisaged in the law.

The age, dispersion and insufficiency of regulations, together with the imminent expiry of the permits granted prior to the entry into force of the LSE (Royal Decree-Law 15/2018, in addition to contemplating various measures aimed at making possible the completion of ongoing projects, provided for the extension of the economic guarantees created for this purpose) led the Secretary of State for Energy to prepare a draft royal decree to implement the provisions of its eleventh transitional provision. However, this draft, issued by the Spanish National Commission on Markets and Competition (“CNMC”) in September 2018 has not been approved, and the insufficient regulation contained (above all) in Royal Decree 1955/2000 remains in force. This regulation, among other shortcomings, does not establish priority criteria among the different applications that may be submitted for the same connection point; it regulates in an excessively diffuse way the node interlocutor, and provides no criteria for the return of the economic guarantees that the developers must provide to secure against non-execution of the project. 

Without prejudice to the regulatory authority that the Government reserves to itself in the matter (paragraphs 7 and 10 of art. 33 LSE), Royal Decree-Law 1/2019 has empowered the CNMC to issue “regulatory circulars” on energy matters that, among other things, regulate the methodology and conditions of access and connection, which will include “the content of applications and permits, the economic criteria, the criteria for capacity evaluation, the reasons for refusal, the minimum content of contracts and the obligation of publicity and transparency of the relevant information for access and connection” (art. 33.11 LSE). These circulars must take into account the “energy policy guidelines” approved by the Minister for the Ecological Transition (Order TEC/406/2019 of 5 April) to ensure the consistency of the regulation and its aptness for the envisaged objectives and principles of energy policy.

In compliance with the foregoing provision, the CNMC has drawn up a proposal for a Circular (regulation) establishing the methodology and conditions for access and connection to the transmission and distribution grids of electricity production facilities for the purposes of submission to public information and subsequent approval and publication.

The purpose of the proposed Circular is to “organise and give a horizon of feasibility to the large number of projects currently proposed”, to ensure the principles of third party access to transmission and distribution grids, non-discrimination between users and cooperation and coordination between operators and owners of grids and owners of production facilities, and increase the efficiency of system operation by expediting administrative processing as much as possible and maximising grid use, preventing hoarding of access capacity to the grid by demanding “greater visibility” from projects, with ongoing monitoring of their degree of maturity, and a “high degree of transparency” from grid managers and owners. The objective of combating speculation is latent throughout the entire text of the proposal.

The proposed Circular envisages (art. 4) the joint processing of access and connection permits by means of a “single procedure”, with the operator of the grid to which the connection is requested acting as a “single point of contact” for the owner of the production facility. The proposed Circular sets out a general regulated procedure that provides for mandatory deadlines for both applicants and grid operators and owners.

With regard to the financial guarantees that must be provided in order to commence the processing of access and connection permits (art. 5), the proposed Circular maintains the amounts currently required. The validity of these guarantees must be confirmed beforehand by the competent body for granting the authorisation. Once the validity has been confirmed, the application for permits must be submitted pursuant to established terms and deadlines. The proposed Circular regulates execution of guarantees, as well as exceptions for such execution (essentially linked to the existence of “prohibitive circumstances not attributable to the concerned party”).

Applications for new connections or modifications to existing ones must have a minimum content (including the financial guarantee and land option contracts -excluding connection infrastructure-), and must be accompanied by detailed technical information showing their viability. Such applications (and any related communications) may be submitted only by electronic means. The priority of applications (in particular for the purposes of assessing access capacity) will be determined by the date of submission to the grid operator (art. 6). It regulates (art. 9) cases of inadmissibility of applications (non-compliance with deadlines and failure to remedy observed deficiencies) and the associated consequences (execution of financial guarantees provided).

In contrast to the provisions of the draft law on climate change and energy transition, when a significant volume of available capacity arises (e.g. in the event of closure of installations, providing for the possibility of entering into a just transition agreement that provides for “priority access to part or all of the power evacuation capacity”), the proposed Circular, in cases where such available capacity in a node exceeds 200 MW, states (art. 8) that applications for access shall not follow the order of priority but rather that resulting from a competitive procedure (auction) Each applicant must offer an amount in €/MW. The monetary resources generated will be considered income of the electricity system.

In order to maximise the use of grids, grid operators are required to publish on their website updated information on available capacity at the nodes of their grids with voltages above 1 kV (art. 23); the concept of “supplementary power” is introduced (art. 11), which allows the granting of permits beyond the value resulting from the application of the general criteria, where access is subject to the remaining installed capacity at a connection point being satisfied with its right of access, and provides for the obligation to allow the shared use of connectionfacilities, as long as it does not affect permits already granted and without prejudice to the signing of indemnification  agreements for not less than ten years from the commissioning of the connection facility (five years in the case of pre-existing production facilities covered by the specific remuneration regime).

The proposed Circular provides (art. 22) for the expiry of access and connection permits, as well as for the expiry of certain periods (five years from their granting without having obtained the operating permit; three years from the cessation of discharge into the grid for reasons attributable to the owner other than temporary closure), in the event of non-compliance with certain milestones showing projects’ progress.

The proposed Circular regulates various technical criteria necessary to assess access capacity, to assess the feasibility of connection, to determine the influence of the production facility on a grid other than the one to which it is connected, and to assess whether, faced with certain modifications, an installation remains the same or not for the purposes of applying for access and connection permits.

Competition to resolve conflicts is also regulated, which will be the responsibility of the CNMC (in the case of transmission and distribution installations, the responsibility of the state administration) and the competent body of the Autonomous Community (in the case of grids under autonomous regional authorities).

Lastly, the proposed Circular contemplates the rights and obligations of developers of projects in progress at the time of its entry into force (developers that have provided guarantees who have not applied for grid access and connection permits, developers in the process of arranging access and connection permits and developers that have been granted access and connection permits).

In short, we are faced with an important new regulation that helps to mitigate the legal uncertainty that currently weighs on access and connection permits of electrical energy production facilities, which is an essential step for the future and necessary increase in the installed renewable energy generation capacity.