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renewable sources by 2010 (IDAE, 2005). After this law, the Special Regime
(SR) and the corresponding FIT scheme were first established. The SR included
renewable energy (wind, solar PV, solar thermal, small- scale hydropower, and
biomass/wastes) and co- generation generators, with a maximum of 50 MW
power.
Later, Royal Decree 436/2004 (BOE, 2004), known as the Spanish Renewable Energy Act, was set up to fit into the existing general framework supporting
the electricity from RES/RES- E). Generators could decide to sell their electricity to a distributor and receive a fixed tariff (FIT) or sell it on the free market
and receive a premium tariff (FIP) on top of the market price. The main difference between FIT and FIP is that the incentive level under the FIT system is
fixed, whereas under the FIP scheme renewable generators get a guaranteed
premium, which is lower than the FIT, plus the price of the pool. This decree
provided incentives for new RES installed capacity and was subsequently
renewed in the Royal Decree 661/2007 (BOE, 2007a), where new tariffs and
premiums for RES- E generators, as well as a cap and a floor for renewable remuneration, were established.
The combined system of FIT and FIP led to a strong increase of investment
in electricity production from renewable energy so that most technologies
highly exceeded government targets for the period 2005–2010 (IDAE, 2005). In
an attempt to reduce regulatory costs, incentives were adjusted in 2010 (BOE,
2010), including cuts to the FIT of solar thermal electricity and wind generation, and a cap on the number of hours eligible for support for PV installations.
In a context of overcapacity and weak demand, the regulatory changes introduced in 2010 were not deemed sufficient to reduce regulatory costs, and therefore in 2012 a new regulation (BOE, 2012) was passed for the temporary
suppression of FIT and FIP for new installations. These measures left new RES- E
without financial support but existing obligations remained.
The last cutbacks to the FIT–FIP system were passed in 2013 (BOE, 2013a,
2013b) and affected all RES units, including those that were already functioning. The FIT and FIP were reduced for both new and existing generation plants.
This reform aimed at stabilising financial fluctuations in the RES system that
had contributed to the accumulated €26-billion tariff deficit by 2013 (~2% of
Spanish GDP). From 2014 onwards (BOE, 2014a, 2014b) renewable energy producers receive the market price and, if needed, a subsidy to guarantee a fixed
rate of return on investment (the yield of the ten- year Spanish treasury bond
plus 300 basis points), which is subject to review every six years.
The new scheme consists of the regular electricity market price supplemented by
a capacity payment and a generation- based premium which are calculated on the
basis of technology- and project- specific parameters. This new framework includes
several remuneration adjustment mechanisms which could yield additional risks
compared to the former system, based on a pre- established long- term tariff.
Another relevant issue affecting the future of RE in Spain is related to the
role of RE in distributed generation. In this sense, Royal Decree 900/2015
(BOE, 2015) legislates electricity generation for self- consumption. It applies to
renewable sources by 2010 (IDAE, 2005). After this law, the Special Regime
(SR) and the corresponding FIT scheme were first established. The SR included
renewable energy (wind, solar PV, solar thermal, small- scale hydropower, and
biomass/wastes) and co- generation generators, with a maximum of 50 MW
power.
Later, Royal Decree 436/2004 (BOE, 2004), known as the Spanish Renewable Energy Act, was set up to fit into the existing general framework supporting
the electricity from RES/RES- E). Generators could decide to sell their electricity to a distributor and receive a fixed tariff (FIT) or sell it on the free market
and receive a premium tariff (FIP) on top of the market price. The main difference between FIT and FIP is that the incentive level under the FIT system is
fixed, whereas under the FIP scheme renewable generators get a guaranteed
premium, which is lower than the FIT, plus the price of the pool. This decree
provided incentives for new RES installed capacity and was subsequently
renewed in the Royal Decree 661/2007 (BOE, 2007a), where new tariffs and
premiums for RES- E generators, as well as a cap and a floor for renewable remuneration, were established.
The combined system of FIT and FIP led to a strong increase of investment
in electricity production from renewable energy so that most technologies
highly exceeded government targets for the period 2005–2010 (IDAE, 2005). In
an attempt to reduce regulatory costs, incentives were adjusted in 2010 (BOE,
2010), including cuts to the FIT of solar thermal electricity and wind generation, and a cap on the number of hours eligible for support for PV installations.
In a context of overcapacity and weak demand, the regulatory changes introduced in 2010 were not deemed sufficient to reduce regulatory costs, and therefore in 2012 a new regulation (BOE, 2012) was passed for the temporary
suppression of FIT and FIP for new installations. These measures left new RES- E
without financial support but existing obligations remained.
The last cutbacks to the FIT–FIP system were passed in 2013 (BOE, 2013a,
2013b) and affected all RES units, including those that were already functioning. The FIT and FIP were reduced for both new and existing generation plants.
This reform aimed at stabilising financial fluctuations in the RES system that
had contributed to the accumulated €26-billion tariff deficit by 2013 (~2% of
Spanish GDP). From 2014 onwards (BOE, 2014a, 2014b) renewable energy producers receive the market price and, if needed, a subsidy to guarantee a fixed
rate of return on investment (the yield of the ten- year Spanish treasury bond
plus 300 basis points), which is subject to review every six years.
The new scheme consists of the regular electricity market price supplemented by
a capacity payment and a generation- based premium which are calculated on the
basis of technology- and project- specific parameters. This new framework includes
several remuneration adjustment mechanisms which could yield additional risks
compared to the former system, based on a pre- established long- term tariff.
Another relevant issue affecting the future of RE in Spain is related to the
role of RE in distributed generation. In this sense, Royal Decree 900/2015
(BOE, 2015) legislates electricity generation for self- consumption. It applies to