Energy law in Spain (3): Applicable deadlines for project development and their consequences

The primary requirement to apply for grid connection and feed-in permits in Spain has for years been the depositing of an economic guarantee (or aval) with the competent authorities. The competent authorities will differ depending on the size and location of the project.

Essentially, the security ensures the correct execution of projects and is enforced when a project fails for specific reasons. In 2018, the security amount increased from a capacity of EUR 10/kW to EUR 40/kW.

Project development deadlines

As a significant innovation, Royal Decree-Law 23/2020, dated 23 June 2020, introduced some specific deadlines, the failure of which would, in principle, lead to the enforcement of the security deposit. Article 26 of the new Royal Decree 1183/2020 incorporated the following deadlines:

Previous regulation on the suspension of the enforcement of the guarantee

The previous regulation considered the enforcement of the security deposit if the project was abandoned.

However, the suspension of enforcement of the guarantee was possible if the reasons for the failure of the project were not the responsibility of the respective project developer.

The assessment of exactly when the failure of a project is considered the responsibility of the respective project developer has often been a matter of dispute, especially in cases where the failure was due to the denial of an administrative permit required for the project’s construction. The prevailing opinion in such cases was to reduce the administration’s discretionary power to zero, thereby considering the suspension of enforcement of the guarantee the only legally correct option.

In other cases, the possibility of suspending enforcement was contested. Problems arose, for example, with leases necessary for project implementation or other aspects of securing land, which led to the abandonment of the project. Another classic case of project abandonment was because of the circumstances that affected the economic viability of the project (which were in some cases alleged to not be the fault of the project’s developer).

The new regulation provides clarity

The new regulation continues to allow the suspension of the enforcement of the guarantee. However, new wording should provide some clarity regarding the applicable conditions.

The new Royal Decree 1183/2020 explicitly states in Article 23.4 that a suspension of enforcement is only possible if implementing the project fails because of an official declaration or administrative authorization required for this purpose.

The extent and/or specific characteristics of the official declaration required to suspend enforcement in such cases would still need clarification; in this respect, the wording does not change regarding the previous regulation.

Impact on the renewable energy market in Spain

The impact of the new regulation on the Spanish renewable energy market remains unknown. The new legislation aims to create additional security for investors.

However, the new deadlines increase pressure for the timely implementation of projects.

It may become interesting if these deadlines affect previously abandoned projects. This could lead to the release of previously blocked grid capacities in favour of technically, legally, and economically better-positioned projects. An increase in transactions to finance these projects may be a plausible consequence. It remains exciting!

Pia V. Kohrs

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