Climate change draft law, first round

It is obvious that the first primary energy source in Spain is the sun, ahead of wind and water. The objectives set out in the bill on climate change and ecological transition, approved by the Spanish Government on Tuesday, May 19, cannot be met without a highly relevant development of solar energy.

The bill establishes the following objectives for the year 2030:

– A 20% reduction in CO2 emissions compared to 1990.

– 35% of final energy consumption must come from renewable sources

– 70% of electricity generation must come from green energy.

– To improve by 35% the efficiency of primary energy consumption.

– Declaration of low emissions zones in municipalities with more than 50,000 inhabitants.

The text has 36 articles distributed in nine titles. It is the result of a process of review and public participation started in February 2019. According to the Government’s text sent to the Parliament, it includes reports from the relevant institutions linked to environment (Consejo Asesor del Medio Ambiente) , national climate (Consejo Nacional del Clima), climate change coordination (Comisión de Coordinación de Políticas de Cambio Climático), the sectorial conference of Spanish autonomous communities (Conferencia Sectorial con las Comunidades Autónomas), the National Comission of Markets and competition (Comisión Nacional de los Mercados y la Competencia) and the State Counsil (Consejo de Estado), among other institutions.

The document approved by the council of ministers now begins its parliamentary procedure. Given current fragmentation in the Congress of Deputies and the enormous difficulties that the socialist group has in reaching parliamentary majorities, it is likely that the draft law will be subject to relevant modifications during its approval procedure, although initially the Government is not forgo its main goal that Spain becomes a carbon neutral country by 2050 .

Through the parliamentary procedure, the political groups must clear the main question of the project: its financing. The text generically points to a “new remuneration framework for renewable generation, based on the long-term recognition of a fixed price for energy”, which aims to offer “predictability and stability of income to the sector”.

The new remuneration framework will be granted “through auctions in which the product to be auctioned will be electric energy, installed power or a combination of both, and the variable which will be offered should be the price of remuneration for said energy”. It will distinguish between different generation technologies based on their technical characteristics, manageability levels, location criteria, technological maturity and those others that guarantee the transition to a decarbonised economy.

Predictability and stability are not precisely the terms that can be applied to the background of Spanish regulation regarding energy industry. The renewable energy sector needs this proclaimed predictability to be transformed into legal certainty, in such a way that it provides a stable framework and a reasonable return on investments that, given the nature of the sector, requires a long-term perspective.

The climate change and ecological transition law is a new opportunity for the regulator, industry, lenders, investors, and consumers to find the necessary point of neutrality.