Locations
1. From 13 February to 7 March 2025, the Spanish Ministry for Ecological Transition and the Demographic Challenge has opened the public hearing and consultation procedure on the proposed Royal Decree and Ministerial Order for the remuneration scheme for cogeneration facilities (see Public hearing and consultation on the proposed Royal Decree and Ministerial Order for the granting of the specific remuneration scheme for cogeneration facilities).
2. Scope: A specific remuneration scheme is envisaged for a total of 1,200 MW of cogeneration capacity (subgroup a.1.1, groups b.6 and b.8; biomass is included for the first time), through three successive calls for 400 MW, between 2025 and 2027. If one call does not award all the capacity, this can be accumulated in the next call.
It does not seem that this design of successive "partial" calls for proposals can be bearable for installations whose useful life is coming to an end, and which have been waiting for this call for proposals for three years since its announcement and some previous drafts.
It is specified that the remuneration scheme will be applicable both for new installations (construction of a plant with new main equipment where there was no cogeneration, or incorporation of a new remuneration unit without totally dismantling the existing one), and for modifications to existing installations (investments to extend the useful life, improve performance, increase flexibility or reduce emissions of an existing installation).
3. Purpose: The allocation of the specific remuneration scheme will be carried out by means of a competitive procedure consisting of an auction including the matching mechanism (mecanismo de casación). The details of the power quota for each range and typology will be published in the corresponding call for tenders. It is important, therefore, to make sure that the installation that intends to compete ensures that its typology is compatible.
The product to be auctioned is (i) the installed power for each reference standard installation and (ii) the variable to be bid on will be the percentage reduction of the standard value of the initial investment of each reference standard installation.
As a result of the auction, a percentage reduction of the standard value of the initial investment of the reference standard installation will be obtained. Based on the latter value and the rest of the remuneration parameters of the standard installation, the return on investment will be obtained using the value of 7.09%, which will be reviewed at the end of the year. For the 2026-2031 regulatory period, it will be published with the rest of the Economic Regime for Renewable Energies, Cogeneration and Waste.
A lifetime of 20 years is set for biomass cogeneration; for gas cogeneration, however, it is reduced to 10 years.
4. Limitations and material requirements:
• Facilities covered by the first transitional provision of Royal Decree 413/2014 (treatment of waste from pig farms, olive oil production sludge or other sludge) and facilities with more than 100 MW of power are excluded from the application. This threshold is reduced to 15 MW for non-peninsular facilities, which in any case cannot be owned by a company or business group that has a percentage of power generation capacity of more than 40% in the specific system.
• A minimum level of self-consumption, whether individual or collective, of 30% must be guaranteed, even though these installations are gas-intensive and heat-intensive, and this will make it difficult to achieve the objectives of the National Integrated Energy and Climate Plan (PNIEC); the surplus below this threshold is not remunerated.
• Installations will be required to be prepared to consume at least 10% of renewable hydrogen. Perhaps a more pragmatic formula could have been envisaged.
• They must comply with sufficient levels of primary energy savings to be considered of high or very high efficiency (5% for capacities of less than 1 MW and 15% in all other cases, which does not seem consistent with EU regulations, leading to the corresponding discrimination and competitiveness deficit).
• A number of eligible investments are set out, which will need to be reviewed to match those planned or undertaken by the applicants.
• Biomass plants will also have to comply with the established sustainability and emission reduction criteria.
5. Procedure: Each tender will be composed of one or more tranches. For each of the tranches, the power expressed in kW and the percentage reduction of the standard value of the initial investment shall be indicated.
The auction process will be carried out using the closed auction method with a marginal system, therefore, the percentage reduction of the standard value of the initial investment applicable to each tranche that is awarded will be the percentage reduction of the last tranche matched in the reference standard installation. For the calculation of the remuneration parameters of the reference standard installation, the Order establishes that the costs necessary to carry out the activity by an efficient and well-managed company have been considered.
6. Guarantees: 20 euros/kW for the power for which it is intended to bid.
7. Pre-allocation: Awardees have two months to apply for registration. The application must include a strategic impact assessment plan (employment, industrial value chain, circular economy, etc.), which will be published on the Spanish Ministry for Ecological Transition and the Demographic Challenge website. The resolution will be notified within a maximum of three months.
8. Exploitation: The application shall include, inter alia, a definitive impact assessment plan. The decision will be notified within a maximum of three months after submission.
9. Next steps: After this public consultation process, a report will be issued by the Spanish Commission for Markets and Competition (where allegations can also be made), and by the Spanish Council of State.