Renewable energies are the solution to high energy prices, the guarantee of greater energy security for the country and mean less dependence on gas imports. Any measure that is adopted and delays investment in renewables does nothing but postpone the solution to the current problem of energy prices and dependence on foreign sources. In Spain, the adjustments proposed by the recently approved COUNCIL REGULATION (EU) 2022/1854 regarding revenues from renewable technologies have already been put into effect. Penalizing or delaying decision-making on renewable investments through the imposition of new taxes directly implies penalizing or delaying, among other things, orders for wind farms located in Spain with an effect on the European value chain. Renewables are the main solution to the energy crisis in the EU and, as the EU has agreed through the REpowerEU initiative, their implementation must be speeded up, speeding up administrative procedures, guaranteeing that they can be integrated into networks, with legal certainty , consolidating Spain’s leadership in this sector. AEE shares the position of the European sector
AEE echoes the position of the European Wind Energy Association, WindEurope, in relation to the new EU Regulation on energy price containment. In the positioning of the European wind sector, concern is expressed about possible further regulatory interventions that may affect investments in renewables.
WindEurope states in its statement, “The Regulation initially aimed at a limit in the EU for all forms of inframarginal power generation. But the Regulation, as adopted last week, does not prevent national governments from introducing additional taxes and being able to take uncoordinated measures on different types of power generation.” In this sense, it also states that “some national governments are already planning new taxes that would be added to the EU’s emergency measures. And these additional measures include taxes on the total income of electricity producers, rather than their profits. This will stop investments in renewable energy“.
The measures adopted in Spain already comply with the Regulation
In Spain, the successive measures approved by the Government during the last 12 months comply with the contents of the new EU Regulation to tackle energy prices. On the one hand, the measures already adopted in the three RDLs (RDL 17/21, RDL 23/21 and RDL 6/22) imply a reduction in the income of inframarginal energies that operate directly on the market; And, on the other hand, for those facilities that are covered under the regulated remuneration regime (RECORE), through the aforementioned RDL 6/22, the amount of the incentives to be received has been revised downwards in advance, based on actual market prices and future estimates.
In addition, the cap on the price of gas for electricity generation (adopted by RDL 10/2022), has also reduced the price of the electricity market. In 85% of the hours since the Iberian exemption was approved, the market price has been below the €180/MWh ceiling proposed in the Regulation. In Spain, therefore, the adjustments proposed by the regulation have already been carried out.
In addition, the cap on the price of gas for electricity generation (adopted by RDL 10/2022), has also reduced the price of the electricity market. In 85% of the hours since the Iberian exemption was approved, the market price has been below the €180/MWh ceiling proposed in the Regulation. In Spain, therefore, the adjustments proposed by the regulation have already been carried out.
Any additional levy would penalize a significant percentage of investment in renewables and affect the pace of orders for the wind industry
The wind sector considers that any tax, tribute or levy that is added to the existing situation and that is not strictly focused on reducing benefits has no place within the objective or spirit of the new Regulation, nor is it justified from the point of view of macroeconomic, energy, climate or fiscal rigor point of view.
The imposition of new taxes would constitute a regulatory decision without legal robustness, which would penalize the decision-making on renewable investments in those business groups affected, which could delay the start-up of a significant percentage of renewable generation during the next few years, depriving the consumer of the benefits in the reduction of the price of electricity that these renewables would motivate with their entry, precisely in the temporary context in which the deployment of renewables in Europe must be accelerated the most.
As a matter of principle, any intervention on a market – in this case the electricity market – requires a review of the investment strategies by the actors until they know the risks of the new scenario. In the specific case of wind power, it has important industrial implications as it slows down decision-making on orders from the industry for new wind turbines to be installed in the coming years, conditioning the workload of factories based in Europe. In Spain we have 250 industrial centers, which cover 100% of the wind value chain.
Concern about the lack of cohesion in Europe with the detailed measures and the effect of attracting investment from other markets
Additional risks are identified that concern the wind sector in Spain and Europe. The lack of cohesion and coordination of the detailed measures that each government decides to implement will generate, de facto, markets with significant differences in attraction for investors, breaking the spirit of the single market in Europe.
The risk comes from the different maximum prices for all inframarginal energy generation that may exist in each country -which should tend to be the same for all- and from the margin that Europe opens up for national governments to add new own taxes until 31 of December 2022, which would be added to the emergency measures of the EU, and which would further aggravate the imbalance by generating competitive advantages to attract investments from some member countries over others, breaking the unity of effort of the EU and the market only European.
If we add to all this the strategies of accelerated support and tax reductions for renewables that third markets -such as the US- are adopting in this regard, precisely by providing certainty and unity of criteria in the current situation, the interest of the companies could shift in prioritize investments in the coming years in these markets over the Spanish market or the European market in general.
This investment gap would affect the projects that are currently in the initial stages of processing, implying a delay in the installation of wind farms in Spain in the medium term 2024-2026, which could affect 23% of the current forecast, with macroeconomic implications of €2,500 million in delayed investments, and €422 million in lost annual savings in the price of electricity for citizens.
The subsequent challenge of returning to the previous equilibrium situation in the Union
The wind energy sector also expresses its concern about the difficulty that it would mean to return to a balanced situation after the crisis. The changes that are going to occur in the market due to the measures that are taken will generate new markets that can be consolidated, but they will be based on a lack of cohesion and on the search for the particular interests of each country. We must start working on this process now so that, in no case, this return to the origins penalizes the Spanish market compared to other European countries.
Conditions for the next renewable energy auction
The Spanish Government has announced renewable energy auctions of 520 MW for October 25 and 3.3 GW for November 22. All of the above may have an effect on the result of the auctions. Under what assumptions of income, risks and costs should companies design their offers in them?
Several concerns arise at this point: The most financially delicate moment for any renewable installation is the first few years, since most of the project expenses are concentrated in this period (also the risks related to the start-up of the plant and the achievement of objectives, expected generation, etc.), and the debt with banks/financial institutions is at its highest point. Therefore, any uncertainty in the first years of the business plan affects the economics of the plant and the financial closure, which will have to be carried out in the next 2-3 years. Auction participants may need to increase their bids or may not find it interesting to participate in auctions if there is no visibility into the value and stability of the revenue cap on inframarginal technologies. In conclusion, it is necessary to continue guaranteeing European cohesion in the measures to protect citizens and companies from high energy prices, but not only in high-level agreements but also in the detailed measures of each country, avoiding , in the specific case of Spain, situations that generate more uncertainty about the income of the new renewable installations in the coming years and that condition the investment decision of a significant percentage of them.
