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Spanish govt plans to back PPAs for energy-intensive industry

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February 20 (Renewables Now) - The Spanish government has prepared two draft laws directed at energy-intensive industrial consumers to help them ease some of the burden of high costs of electricity through access to state aid, at the same time supporting renewables development through power purchase agreements (PPAs).

The proposed regulation defines the 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 provides for 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 in the form of financial compensation for paying for items such as support for renewable energy and high-efficiency cogeneration 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 that leads to state aid comes with strings attached – 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 has 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 endowed with EUR 200 million which will rise to EUR 600 million for the first three years.

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

Spanish energy-intensive companies have access to a variety of tailor-made PPAs regardless of whether the state intervenes or not. Just recently, 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 consumer and the renewables developer. 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.

(EUR 1.0 = USD 1.08)

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Sladjana has significant experience as a Spain-focused business news reporter and is now diving deeper into the global renewable energy industry. She is the person to seek if you need information about Latin American renewables and the Spanish market.

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