Energy storage regulation in Spain

1. What electricity storage projects have been commissioned in your jurisdiction to date?

There are currently 20 operational pumped hydro storage projects placed on different hydroelectric power plants in Spain with a combined capacity of over 8.1 GW, the last of which was commissioned in 2015. These projects principally provide for time-shifted electricity supply capacity and spinning reserve capacity, and were developed and are owned by the major commercial and engineering group of companies in Spain: Iberdrola, Endesa, E.ON, EDP or Acciona.

In addition, industry participants have been turning their attention to battery storage technologies. Nevertheless, the latest Spanish self-consumption legislation has been a setback to the development of these technologies, taking into account that it prohibits self-consumption on the communities of neighbours.

2. What electricity storage projects are anticipated in your jurisdiction in coming years?

Currently, lithium-ion battery technology is an area of focus in Spain.

In fact, Red Eléctrica de España, the system operator, is currently running a project (Project Almacena), which basically consists of field installation of a system of energy storage with a lithium-ion battery with a power of about 1 MW and a capacity of at least 3 MWh, with the purpose of evaluating the capabilities and technical features which currently offers such facilities as a tool to improve the efficiency of the operation of the Spanish electricity system.

In order to be monitored and controlled at all times, the energy storage system will be connected to Red Eléctrica de España´s communication system and it will be installed in a 16 meters long container with 30 “racks” prismatic lithium-ion cells. The project will be also supported by the European Union by means of its European Regional Development’s Funds (“FEDER”) Programme.

3. Is there any specific legislation/regulation or programme that relates to energy storage in your jurisdiction?

Electricity storage is not separately regulated in the Spanish legislative framework. It is currently deemed to be generation for the purposes of licensing under the Electricity Act 2013.

As a result, energy storage projects that depend on hydroelectric power plants projects must hold an authorisation or licence for the exercise of their activity. Holding a generation licence places a number of obligations on the licensee, such as compliance with safety regulation, issuance of information to the public authorities, payment of tolls of the electricity system or evacuation of the energy generated.

No specific subsidy or Government commitment to a level of deployment of electricity storage is expected.

There is certain funding available for research and development purposes, like the support granted by the European Union by means of its European Regional Development’s FEDER Programme given to Red Eléctrica Española´s research.

4. Please give examples of challenges facing energy storage projects in your jurisdiction and how current projects have overcome these challenges.

Energy storage projects may face challenges from the recently passed self-consumption legislation, Royal Decree 900/2015 (the “Decree”), passed in October 2015. This legislation aims to establish technical, economic and administrative regulation for the consumption of electricity. While the Decree notes that energy storage allows for more efficient energy management, including the increased integration of renewable generation, it also introduces financial obligations for solar PV projects, including those using energy storage. The Decree covers two categories of self-consumption: (1) where a project is entirely off-grid and produces electricity only for its own consumption, and (2) where a project produces electricity for its own consumption, but is also connected to the grid and may import or export power. Projects in the second category will need to be registered and are subject to the new charge. Notably, the law is retroactive.

The Decree introduces what is effectively a tax on self-consumption; installations which are off-grid, under 10kW, or on some islands will be exempt. The so-called “sun tax” has a fixed component based on the contracted power with the utility, and a variable component based on the solar PV generation. The initial draft banned battery storage. The enacted version allows for battery storage, but their use will not be allowed to reduce the amount of contracted power (the larger part of residential energy bills) and thus will not lower the tax. The Energy Ministry has stated that the tax is needed to contribute to system maintenance costs, but consumers and industry stakeholders have argued it is an unfair burden on self-consumption users who are, if anything, reducing their burden on Spain’s grid system and noting that the penalty fine for non-compliance is double that of a nuclear leak. However, the Decree’s impact on energy storage projects has been lower than expected due to lower investment and the prohibition of ‘self-consumers’ from connecting to private grids, for example a residents’ association.

5. What are the main entities in the electricity sector and what are their roles or expected roles in relation to energy storage?

The Government is the relevant legislator for electricity storage, though as noted above, currently there is no specific storage regulatory regime.

Red Eléctrica Española is the electric grid system operator in Spain, which procures various ancillary services (such ancillary services provide key revenue streams for energy storage) and promotes research and development on the storage technologies.

In addition, the large commercial and engineering group of companies in Spain named above are the main private entities in the electricity sector in relation to energy storage, as they are developers of pumped hydro projects.

It is expected that other utilities and independent developers will be at the forefront of the deployment of grid-scale electricity storage in Spain.