Cogeneration plants may benefit from the gas capping mechanism after the publication of Royal Decree-Law 17/2022.

In the current context of high natural gas prices in the national and international markets, the Government has approved Royal Decree-Law 17/2022, of September 20, which adopts urgent measures in the field of energy, in the application of the remuneration system to cogeneration facilities and the rate of Value Added Tax applicable to deliveries, imports and intra-community acquisitions of certain fuels is temporarily reduced.

As of October 1, 2022, and for the duration of its validity, cogeneration plants will also be able to take advantage of the temporary mechanism for adjusting the production costs of facilities that use natural gas as fuel, colloquially called "gas capping". Thus, in addition to the income from the pool, they will receive the compensation regulated by Royal Decree-Law 10/2022, of May 13, for the electrical energy delivered to the grid.

The facilities that decide to take advantage of this mechanism will temporarily waive the specific remuneration regime, for which they will no longer receive the aforementioned remuneration. However, they will be exempted from compliance with minimum hours of operation or energy efficiency. This waiver will be reversible, recovering the plants upon completion the right to receive the specific remuneration.

The Royal Decree-law contains other measures to mitigate the energy crisis, such as the reduction of VAT to 5% until the end of the year for consumers, or others to facilitate the implementation of renewable energies.

You can consult the full legal text at the following link:

https://www.boe.es/boe/dias/2022/09/21/pdfs/BOE-A-2022-15354.pdf

After yesterday's approval from the European Commission to the so-called "Iberian exception", The Ministry for the Ecological Transition and the Demographic Challenge has published Order TED/517/2022, of June 8, which determines the date of entry into force of the production cost adjustment mechanism for the reduction of the price of electricity in the wholesale market regulated in Royal Decree-Law 10/2022, of May 13, and by which the decision of the European Commission authorizing said mechanism is publicized.

This mechanism will begin to be applied in the auctions of the Iberian electricity market as of June 14, and will be in force for one year, until May 31, 2023. It is estimated that it will mean an extra aid of 8,400 million euros (6,300 million in Spain) to electricity producers in coal-fired power plants, combined cycle natural gas plants, as well as cogeneration plants that do not receive specific remuneration. During the validity of this mechanism, the aforementioned generators will receive a supplement on the electricity fed into the network, which will help them defray the costs of purchasing fuel. To the same extent, these producers will have to reduce their offers to the electricity market, known as the pool, so it is expected that the matching prices of the electricity market will fall and thus benefit consumers, especially those who buy electricity directly in the market, or whose contracts are referenced to the pool.

The supplement that producers will receive will be calculated each day by taking the difference between the prices marked by the Iberian Gas Market (MIBGAS) and the cap set in Royal Decree-Law 10/2022, which on average will be around €48/MWh, starting in the first semester at €40/MWh and gradually increasing. This difference in gas prices will be transformed into the supplement that will be charged for the sale of electricity by applying the average electrical performance of the combined cycles. The amount of this benefit will be paid with the invoices of the consumers in the resellers with contracts indexed to the pool and those covered by the PVPC or regulated market.

You can consult the full legal text at the following links:

https://www.boe.es/diario_boe/txt.php?id=BOE-A-2022-7843

https://www.boe.es/diario_boe/txt.php?id=BOE-A-2022-9435

Since the second half of 2021, both Spain and Europe have been experiencing an unprecedented energy price crisis in recent history, with a high impact on domestic and industrial economies. This situation has only worsened since the Russian invasion of Ukraine began on February 24. For example, the cost of natural gas, which largely determines the price of electricity, has multiplied by five since last summer. In turn, oil has doubled its price in the last year.

To help mitigate the effects of this crisis on the economy, the Government has published Royal Decree-Law 6/2022, of March 29, which adopts urgent measures within the framework of the National Plan to respond to the economic consequences and social aspects of the war in Ukraine. Below, among the many measures set forth in it, we summarize some in the energy field for the industry and power generation facilities:

• Approval of a support mechanism to guarantee the competitiveness of the electro-intensive industry, consisting of a reduction in the electricity bill of 80 percent of the cost corresponding to the tolls for access to the electricity transmission and distribution networks applicable in 2022.
• Support measures for the gas-intensive industry, with direct line aid to companies in certain sectors (manufacturing of paper, glass, or ceramic products, among others).
• Update of the remuneration parameters of the facilities under the specific remuneration regime applicable to the year 2022. The new remuneration will be established by ministerial order within two months, in which the remuneration parameters established in Order TED/171/2020 will be updated. The price of the emission allowances will also be used to update the remuneration parameters. In any case, the review of parameters for the year 2022 is carried out in addition to the reviews provided for in the regulations.
• To finance the social bond, the unit value corresponding to the regulated subjects that carry out the power production activity will be €1.030790/MWh.

You can consult the full legal text at the following link:

https://www.boe.es/eli/es/rdl/2022/03/29/6