A New Regulatory Framework for Renewable Energy: Market-Based Compensation and Guaranteed Return Mechanism in Spain
A new piece of regulation on renewable energy, cogeneration and waste has entered into force in June 2014 Royal Decree 413/2014 on energy production from renewable sources, cogeneration and waste.
This regulation aims to overcome the lack of foresight of the previous legislation and reasonably offer the renewable sector’s ability to compete in the electricity market.
The new compensation system is based on the following parameters:
- Compensation for power sales at market price.
- Retribution investment to cover the costs of non-recoverable investment with the selling price of energy.
- Remuneration to the operation, which would equal the difference between the operating costs and the selling price of energy generated if a deficit.
The establishment of a reasonable return on renewable energy generation should be equivalent to the average return of the Spanish Government Bonds to 10 years, plus a spread.