Holtrop S.L.P. blog
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Yesterday we had the opportunity to hear first-hand about Property Assessed Clean Energy (PACE) from Jane Elias, the Director of the Sonoma County Energy Independence Program. PACE is an innovative and alternative form of financing for energy upgrades that have a positive impact on the environment. The improvements are affixed to property and they can cover energy efficiency measures, installation of distributed generation from renewable sources, window insulation, water conservation or other retrofitting measures. PACE can be used in all sectors, from commercial to residential and agricultural, providing increased comfort and efficiency as well as reducing utility bills.

The way the system works is through the issuing of a municipal bond, which is then paid back through property tax. A 7% interest rate is set on property tax, 3% is for the treasury and the remaining 4% is for the maintenance of the program. PACE can cover an investment of up to 10% of the property value at the moment of application and only requires an upfront cost of approximately 200 dollars for the applicant to obtain the necessary paperwork, meaning it is a financial tool which is readily available to all.

Because the improvement is affixed to property, it will be passed on to the next owner and in this way, it is an investment which increases the property value. Furthermore, in the case of default on the mortgage payments which leads to a sale of the property, PACE will not be affected as it is linked to the property, meaning that due payments will be covered by the sale price and the improvements will be transferred to the next owner.

PACE was born four years ago in the county of Sonoma in the United States where, because of the recession, there was a strong need to create jobs and banks were unwilling to provide easy financing. Sonoma wanted to tackle climate change by reducing greenhouse gas emissions, and accordingly, PACE was developed, rapidly flourishing and achieving its goals, becoming the 4 billion dollar industry it is today. Currently PACE programs have been implemented in over 30 states in the US, with the development of the necessary enabling legislation.

It is true that there are some differences between the situation in the US relative to Spain, where multifamily buildings are predominant versus single family homes. Keep in mind also that the success of the PACE model depends on the speediness of the process (where an applicant can be approved in between 1 day to 1 week), making PACE very attractive. It is questionable whether these time periods are feasible in Spain. All of this tells us that if we want to implement similar mechanisms in Spain, we will require strong collaboration from the administration at all levels, and of course, a clear message that climate change must be addressed not only at a macro level, but also by taking a bottom up approach.

The predominant system used by the public administration for financing energy conservation measures in Spain so far has been largely based on offering aid schemes. On the other hand, the private sector has offered Energy Performance Contracts, by which installed energy efficiency measures are paid for by reference to the financial saving generated. Thus, PACE allows to utilise the best of both worlds in a joint effort to promote and lead the fight against climate change. 

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After a period of increasing optimism in the renewable sector, which has generated a new wave of green field projects, M&A activities , renegotiations of contracts and new auctions in which we are playing an active role advising our clients, the new Secretary of State has come up stating that the theoretical profitability of 7.39% for renewables generators will not be maintained in the next regulatory period. Instead these may be reduced according to the evolution of the profitability of the 10-year Spanish bond, which would yield a return, at the moment, of around 4.3%. 

After a meeting held by the Secretary of State for Energy with representatives of the photovoltaic sector, the Government assumes that the profitability of renewables facilities will vary according to the yield of the bond, confronting the argumentation that 7.39% was frozen for the whole technical lifespan, as established in the Additional First Provision of Royal Decree-Law 9/2013.

Before this alarming news, internally we have held several urgent conversations in the office, as well with several representatives of the sector, to decide how to act, with a worrying feeling that "we are back to black". First of all, we need to put up a fight in order to achieve that these Government intentions never see the light in any legislative form. There are legal arguments enough to doubt whether this can be approved for the new regulatory period without passing through the Spanish Parliament, as the differential rate of the remuneration must be approved by Law, as established in Article 19.2 of Royal Decree 413/2014.

In case the proposal were  approved, it would be necessary to re-analyze the legality of the remuneration system at the light of this new perspective. It is crystal clear that with this in force it would be impossible to determine ex ante the profitability of any project, making these  unbankable and thus creating an economic nonsense. Because of this, we will have to re-inform the European Commission about the confirmation of this fear, where 7.39% may or may not remain in the following regulatory periods and, consequently, exhaust all available national remedies, at the light of these new developments.

We sincerely hope that the Secretary of State rectifies and everything comes back together at its place, in a moment of growing activity in the sector, and in which the only thing desired is regulatory stability. We are already missing the dyas of just having a lame duck caretaker Government, which could not betray the legitimate expectations every now and then.

As usual, we remain at your service to comment the latest news.

 

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This is the sum that Jeremy Rifkin gave last week in his participation in a conference in Sant Cugat del Vallès (Barcelona) and it represents the stranded costs to the global energy industry for the transition to a new energy model. Continuing with the numbers, forty eight billion dollars is what, according to the International Energy Association, we will need to invest before 2030 to install the technology which allows us to be more efficient and use less energy, and to generate the remaining energy needed in a cleaner way.

Who will bear the costs? Observing the regulatory practice of our country, the reality is that part of these stranded costs have already been diverted to the renewable energy sector. Renewable producers suffered up to 50% cutbacks on their legitimately set retribution. 

You can read the full article in Spanish published by Piet Holtrop in Energías Renovables here.

 

Marjolein Koene

www.holtropslp.com

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Coming September 28, 2016 the Catalan Energy Efficiency Cluster (Clúster d’Eficiència Energètica de Catalunya) and Holtrop S.L.P. Transaction & Business Law will organize a  debate on Photovoltaics, called “Spain: Government against Renewables” together with Fundación Renovables, Som EnergiaANPIER and the actor César Vea including  the premiere of the documentary  “El Camino del Sol” in Barcelona.

 

Place of celebration: Auditori Pompeu Fabra del COEIC – Vía Laietana, 39 – Barcelona from 18:00 a 20:30.To see the full programm of the event, please click on following pdf-document (in Spanish): 

 Programm

The programm of the conference is as follows: 

 

Opening paper, 18:00-18:15

Janet Sanz Cid - "Ecología, Urbanismo y Movilidad" Townhall of Barcelona

 

Table 1: Renewables in Spain: past, present and future, 18:15-19:15

Moderator: Francesc Ribera, Clúster d’Eficiència Energètica de Catalunya

Why should we stand up for renewables?, Joan Herrera, Fundación Renovables

What has happened with renewables in Spain?, Pere Guerra, ANPIER

How is the actual situation?, Piet Holtrop, HOLTROP SLP Transaction & Business Law

What is the future of renewables in Spain?, Sara Gutiérrez, Som Energia

 

Table 2: Showing of the documentary “El Camino del Sol” (19:15-19:45) and debate (19:45-20:30)

Daniel Pérez, HOLTROP SLP Transaction & Business Law

César Vea, director “El Camino del Sol”

 

If you are interested in knowing more about "El Camino del Sol" and César Vea's next project, the film Sol(d) Out" please click herehere or here.

 

Marjolein Koene

www.holtropslp.com

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This article, written by Daniel Perez Rodriguez, partner of Holtrop S.L.P. Transaction & Business Law,  was originally published in Spanish in "el Periódico de la Energía" on September 8th, 2016.

A history on renewables and bricks

Imagine, dear reader, that you own an empty house that needs reforming, and that I have been relocated in 2007 to work in your city for good. As your house is outdated, you agree to make significant necessary investments to condition the housing in exchange for a commitment on my part to stay in the house for the next 30 years, so that you can amortize your investment. We agree on a rental rate of 700 EUR per month, upgradeable annually according to the Consumer Price Index, which I will have to pay in the first 5 days of each month. And for added security, we notarize the contract and officially register it.

Well, imagine that after three years of living in your house and paying the agreed rent, at the end of 2010 I unilaterally decide that instead of 30 years I reduce the duration of the contract to 25. And a few days later, due to the fact that the housing prices have dropped and because of the economic crisis, I make the decision to only pay you the monthly instalments until September of each year, failing to pay the last three.

On top of that, in 2012, I decide I'll pay 7% less rent each month because the neighbours are very noisy, and therefore I have to buy earplugs to sleep. The following year I choose to set a fixed rental price, eliminating the updating of the rent according to the CPI. And I decide that instead of paying the full rental amount each month, I will pay you a percentage, paying you the rest when I collect the money from several creditors who still owe me.

In 2013, emboldened by the improvements in the contract that I'm achieving, I decide to change the way of calculating the rent according to a method I still have to establish, and in the meantime, I pay you on account. The following year, at last, I fix the method. I decide that I will pay you a variable amount, so that in this way, in the 25 years of rental duration you get a reasonable return, which will be determined by the profitability the banks will give me for a bank deposit of 10 years. That return will be calculated taking investment costs of housing and maintenance costs into account. Not your actual costs, but some estimated costs, assuming you were a "model house owner". And of course, to establish how much the house costed, I cannot consider what you paid, but rather the cost for the builder of the entire complex, i.e., the "housing complex", to situate the houses at a distance of less than 500 meters apart from one another. In your costs I will neither consider autonomous nor local taxes, and from your income I will subtract the aid for housing rehabilitation you received when you did the construction. Of course, I will also subtract all I have paid these years when it comes to the calculation of what I still owe you, but in a manner that the profitability you get seems reasonable to me. Oh, and every six years I will update the rent I pay you. That's it for now.

I almost forgot: If you decide to finalize the rental agreement and you wish to come and "self-consume" your house, you will have to ask permission to the local real estate agency, which may take several months, and you will have to pay me a fee, as a compensation to the rest of the owners who cannot rent  their house to you, because you already live in yours. And it is strictly forbidden to share the "self-consumption" of your home with others, because the damage for other landlords would be even greater.

P.S. This story is based on real facts. Not in the real estate sector, of course, where it is inconceivable that something like this could happen. As soon as the tenant goes too far, he will be evicted and problem solved. These events have happened in the renewables sector. Just substitute the author of these lines by the Ministry of Industry of the Kingdom of Spain and the patient reader by a renewable energy producer.

Unfortunately, to make the whole story worse, it is not only that there is a Ministry or a person acting this way, as in the case of the story that has been told. What is really dramatic is that those responsible for interpreting the rules, i.e., the Courts, have decided that the behaviour of the Ministry is in compliance with the Law and that renewable energy producers have the obligation to support all these unilateral changes that I have been describing, or those that may be imposed in the future, so as that the Ministry can declare that the return obtained by renewables producers is "reasonable".

 

 

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This article was originally published in Spanish in the "Panorama" section of www.energias-renovables.com on 6th September 2016. Piet Holtrop, founding partner of Holtrop S.L.P. Transaction & Business Law, collaborates from time to time with the magazine and also has a blog in this publication.

In case you are interested in reading the Spanish version please click here.

Dirty Soria

This summer I had some more time than usual to spend on reading since the courts of administrative litigation in Spain are not operational in August. It has been refreshing to read the ideas of Epictetus, Marcus Aurelius and Seneca compared to our reading of what usually comes from the courts. These philosophers seek purity in reasoning and coherence in thought, which should really also be found in court judgments. Especially when it comes to the highest ones in our country.

Supreme Court ruling on RD413 / 2014 and OM IET / 1045/2014

The ruling before summer on the regulatory absurdity of former minister Soria is a great example of inconsistency by definition. There is inconsistency in the fact that the votation has not been unanimous but it is pretended to make it look like there is no reasonable doubt about the interpretation of European law within the meaning of the Treaty on the Functioning of the EU (TFEU) 267. But it is obvious: when all court members do not interprete the law the same way,  there clearly is a reasonable doubt on that very interpretation. You can not pretend you are interpreting national law, subject to the same legal concepts as European law, in particular the concept of legitimate expectations this way.

In this case European law should be applied, and although the concepts are very similar in both national and European law, and therefore interpreting national law seems to be the right way, it is not.  This obviously is not only contrary to the TFEU, but also to the Spanish Constitution (SP) itself, specifically its Article 24. According to the EC a judge can not usurp another one's competences,  in this case the Court of Justice of the European Union .

The Constitutional Court will not have to do the work of the Supreme Court all over again, but will have to rule about the lack of reference for a preliminary ruling. We are lucky that the constitutional question is this one, with all the constitutional and doctrinal relevance involved. If it would have been the other way the Constitutional Court would propably not even admit it, since it does not rule on matters that are a mere infringement of the constitutional rights of Spanish citizens. This is very sad for the citizen, but things are constitutionally in Spain the way they are. The only availabe option is to go to the Court of Human Rights in Strasbourg in case of a not intellectually challenging constitutional matter.

César Vea in Brussels

Speaking of citizens with not appetizing enough problems for our Constitutional Court,  I have to mention our friend and client César Vea here, who will be just today (September 6th, 2016) and tomorrow at the European Parliament in Brussels together with our partner Daniel Pérez to discuss the problem he cries out to heaven. Not only has he be punished in the same way as all the other photovoltaic producers, but also has he been taken out of the whole of the tariff system with arguments that have not been applied to all other producers. We are taking his defence to Strasbourg in order to seek the annulment of this nonsense. César Vea is now working on a film about the ordeal he is suffering, following his short film on the photovoltaic debacle. 

Another faultless one to Washington

Another ordeal for political hygiene and decency in our country consists in sending quoted former industry minister Soria to the World Bank. This is an ordeal for the separation of powers because it is clearly focused on trying to extinguish the fire of the international arbitrations against Spain, which depends on the entity where former minister Soria ends up.

This is indecent, not only because according to the rules of the World Bank only persons of impeccable reputation may be proposed for working there, but also because, apart from not being it now, they send him on purpose to demonstrate his "impeccable reputation" over there. And to make matters worse, it's starting to be a habit sending dirty money people over there. In the case of Soria it's probably double dirty money, metaphorically for tax evasion and literally for proceeding the money from dirty sources in terms of energy.

From Madrid to Luxembourg

I have strayed a bit from my initial issue: consistency in thought and purity in reasoning. I consider myself a stoic person, just like the philosophers I mention in the introduction of this article and I will serenely insist to achieve a just sentence by using all the legal weapons at my disposal. I'm more motivated and more convinced than ever about the fact that the Court of Justice of the European Union will interpret European law as I have always maintained. Each time more people share my thinking and now I am sharing it at least materially together with three judges of the Supreme Court of Spain. This is quite someting. 

Coincidentally the same evening after the publication of this article we learned that former minister Soria had withdrawn his candidature at the World Bank.

 

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The informative session on market derivatives organized by APPA on 20th July in Madrid  proved to be very instructive. The focus of the seminar was on one specific type of derivative and one type of consumer, namely, swaps and renewables producers.

It is well known that swaps are complex products, not only because the law says so itself, but because of their very nature. Indeed, there are implicit swaps (which are contained in another contract, typically a credit or loan agreement) and explicit swaps (which have been contracted separately), furthermore, they can be future, exotic, generic and they may be subscribed in organized markets or in the over the counter market (OTC); ninety percent of swaps are subscribed in these latter markets. The International Swap and Derivatives Association has indicated that for OTC markets, only parties in equal conditions can operate in them. While the Spanish Stock Market Law assumes that a party with a certain business volume (20-40M€) can be considered professional, assuming that this automatically makes them experts in financial derivatives, the truth is that it is impossible to negotiate under equal conditions a product of which something as essential as the price, is unknown to one of the parties. May it be noted here that, only for the IRS generic swap there exists are daily data that allows, those with access to platforms such as Bloomberg, to analyse their fluctuation.

Therefore, while swaps and derivatives are not intrinsically harmful, the use that they have been given, particularly in relation to the obtention of financing for renewable installations, has had disastrous consequences for many. The reasons for this are several: it could be that it was not the appropriate product to meet the client’s needs, that it was not suitable for the type of client (non-professional), that the product was badly designed (which generates an over-coverage and creates a new risk), or because of the evolution of the markets, for which there is a clear case of information asymmetry between the parties.

Thus, in order to comply with the obligation to provide sufficient and adequate information, the bank must give the client a reasonable valuation of the price of the derivative and its cancellation cost, as well as an efficiency estimation and a diagram with sensitivity indicators. All of this of course, prior to subscription. What the client would realise with these tools is that he was becoming the insurer of the bank. If the purpose was to cover a volatility risk in interest rates, surely there were much simpler ways of doing so, namely, by setting floors and caps to their fluctuation. Nevertheless, they chose to offset one “risk” by generating an even bigger one for the client.

Moving now onto a more practical level, what can we do if we are affected by a harmful swap? As we announced in May (here), the National Comission of Markets and Competition (CNMC) is investigating 4 major banks for collusive agreements in relation to the commercialization of these types of derivatives. A possibility for those who have subscribed swaps with those banks would be to wait for the outcome of the CNMC’s investigation and, if favourable, claim restitution before the Commercial Courts, petitioning them to apply arts. 1 and 2 of the Spanish Law in Defence of Competition, based on art. 1 of Directive 2014/104/EU, which is currently in the process of transposition into Spanish law. According to the Directive “anyone who has suffered harm caused by an infringement of competition law by an undertaking or by an association of undertakings can effectively exercise the right to claim full compensation for that harm from that undertaking or association”. The second possibility available, and the most direct, consists in filing a suit before the civil jurisdiction invoking the breach of the duties of information to be provided by the bank, for which there is extensive case law. Indeed, financial entities are not only bound by their contractual duties, they also have to meticulously comply with all the banking legislation, which includes the said duty of information to the clients. In all cases, in order for our claim to be successful, it is essential that we quantify the harm caused by the swap, as well as providing a detailed description of the duties breached by the counterparty.

To facilitate these kind of claims, litigation funds have recently taken prominence (see news). These funds offer the plaintiff the necessary resources to litigate in exchange for an agreed share of the proceeds of the claim. From Holtrop we are already working to assess these financing opportunities, which would entail a collaboration between us and the litigation fund, allowing us to provide a tailored service to our clients’ needs. 

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The filmmaker César Vea, we had the pleasure to meet at the fair GENERA June 2016 in Madrid and whose short film "El camino del Sol" has already been released, begins this July to shoot his documentary film "Sol ( d) Out ". The director says that "Sol (d) Out is the story of a heist. However, this film does not belong to the detective genre, nor the horror, nor to science fiction. Because Sold (d) Out is not even fiction". César goes on to say that fraud to the renewables sector is a systematically silenced theme, unknown to the general public, the reason to make this effort to bring it to light through a documentary. "

Clicking on the following link you can see a trailer of the film.

The newspaper 20 minutes echoed this news  in the following article:

http://www.20minutos.es/noticia/2765826/0/cesar-vea-cuenta-camino-sol-historia-robo-62-000-familias-que-creimos-energias-verdes/

As far as Holtrop is concerned, we think it's a great initiative. Among other reasons because we see in this film an excellent lobby tool. Cuts to renewables have generated a large number of litigations. However, beyond our sector, there has been little outrage among citizens, and it has rarely been articulated in a way that would lead to concrete, visible and effective results. It is precisely in lobbying where the big electricity companies are light years ahead of us. Therefore we will support this project from our office, giving interviews and also through a financial contribution to the making of the film, as many others have done already (it´s needless to say that the big producers are not fond of joining films about uncomfortable truths). To all those who are interested in supporting this project, or just want to read the description of it by its director, we refer to the following link:

https://m.facebook.com/soldoutfilm/posts/?ref=page_internal&mt_nav=1

Marjolein Koene

www.holtropslp.com

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Last July 2016 our partner Daniel Pérez Rodríguez published following article entitled "Electricity Generation and State Aid: Compatibility Is The Question" in the European State Aid Law Journal (EStAL) Quarterly, Volume 15 (issue 2, 2016), a leading journal in the field of state aid law.

Following please find an extract of this publication, which in its full version contains 21 pages. Due to copyright regulations we can only publish an abstract.

"It was once thought that aid given through the electric system to electricity generators did not constitute State resources, and thus, it was excluded from the Commission’s State aid control. However, time has shown that this was not the general rule, but rather an exception, due to the specific factual circumstances of the analysed measure in PreussenElektra. At least this was the case for the Court of Justice of the European Union, to whose case law the Commission has adapted swiftly. At the moment, it is clear that almost all measures to support electricity generation need to be authorised by the Commission. Hence, focus has shifted to the question of whether a measure is compatible with the internal market rules. In 2014, Commission Guidelines were approved in this field, which are applicable for aid to renewables and aid to generation adequacy, whereas aid to nuclear and coal are still analysed under general State aid rules".

In case of interest, please send us an This email address is being protected from spambots. You need JavaScript enabled to view it. to receive the full version of this publication. You can also order the to paid downloadable version at estal.lexxion.eu by following this link.

 

Daniel Pérez Rodriguez

www.holtropslp.com

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Today we learned that the Supreme Court has raised a question of unconstitutionality to the Constitutional Court regarding the payment of the "Impuesto sobre el Valor de la Producción de Energía Eléctrica" (Tax about the Value of Electricity Production), which applies a 7% rate to the obtained income from the sale of electricity by the producers of it, whether renewable or fossil energy.

The Supreme Court questions the environmental purpose of the tax and considers that in reality it is a pure collection tax. Therefore it decides to ask the TC, who has already dismissed some appeals of unconstitutionality, such as the one from Andalusia, although the legal arguments in that case were different (Article 9.3 of the Constitution, whereas now 31.1 is being invoked).

Now the ball is in the court of the Constitutional Court, who has to decide on the validity of the tax in a ruling that could have unpredictable consequences, since it is not at all clear, in case the tax money has to be paid back, how to perform such devolution. All we know is that whoever does not recur in the four years following to the settlement, will lose the right to recover the amounts paid in that annuity and that likely compensation to the plants will be reduced in case this tax should no longer be paid, since right now it is being computed as an operation cost.  However, if the settlements are closed, theoretically they can not be opened.

In short, it is a development that we value positively, as we have always defended the illegality of the 7% tax,  and which once again proves that the problem of the tariff deficit is not solved in a proper way. It remains to see what the TC decides and, in case of cancellation, how the decision applies.

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Although this has proven an impossible concept to grasp for certain German political leader, spending to save is actually an option, and not a bad one at all.

Energy Performance Contracts (EPCs) set the framework by which installed energy efficiency measures, which are verified and monitored during the whole term of the contract, are paid for by reference to the agreed level of energy efficiency improvement or financial saving generated. In other words, the service provider  (installer) implements the service or technology agreed by the parties for reducing energy consumption or for generating energy sustainably (what is known as the Energy Conservation Measure), thereby offering a financial saving, which is in turn used to fund the cost of the improvements and services.

The objectives behind an EPC project can be varied, from renewable energy generation, to reduction in CO2 emissions, cost savings and improved building environment. Similarly, the Energy Conservation Measure may at the same time contain a wide range of different measures, such as lighting, heating, combined heat and power or metering. Therefore, it is critical to clearly identify objectives and requirements in the contract, as they can sometimes be conflicting. For example, a CO2 reduction may be our main objective, however, the biggest cost saving may not necessarily give the largest CO2 savings, or vice-versa. 

The other cornerstone of these type of contracts is the savings guarantee, meaning that the service provider has to achieve the savings or else, they face being liable for that underperformance. The duration of the guarantee will typically last until the project costs have been covered by the savings. Sure enough, austerity does not always have to be the answer.

In the UK, a number of such projects have been undertaken within the public sector, particularly following the entry into force of The Energy Efficiency (Encouragement, Assessment and Information) Regulations 2014. This piece of legislation sets the basic duties of the competent authorities in relation to energy services and energy performance contracts.

Unfortunately, on 7 August 2015, Eurostat published a guidance note titled "The impact of Energy Performance Contracts´ on government accounts" stating that under Eurostat Accountability rules, energy efficiency investments are considered to be a cost in terms of deficit targets. Unsurprisingly, stakeholder Veolia Spain has said that the guidance note has caused a delay or avoidance of public tenders to enter into energy performance contracts for public buildings.

Once again, while rules and legislation in the field of renewable energy and energy efficiency are pointing one way, common sense, technology and facts are pointing elsewhere.

Marjolein Koene

www.holtropslp.com

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On June 29th, the Association of Renewable Energies (APPA) and the Spanish Energy Club (Enerclub) organise a session entitled: "A new stage for Photovoltaics" in Madrid.

The session starts at 08:45 with a general vision by Arcadio Gutiérrez Zapico, General Director of the Spanish Energy Club, and Xabier Albistur, President of APPA Photovoltaic. As one of the speakers in this first part of the day acts Piet Holtrop, partner of Holtrop SLP Transaction & Business Law.

The venue will continue with several round tables and panels until 14:00 and will be held at the Spanish Energy Club - Paseo de la Castellana 257, 1st floor - 28046 Madrid.

Both members of Enerclub and APPA as well as non-members can participate. Please download all the information regarding the event following this link: Agenda and other relevant information

 

 

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A lawyer sometimes has to be opportunistic in order to obtain the maximum advantage and effect out of unexpected circumstances in benefit of the interests of his clients. This is beyond doubt. At the same time, he has to look after the long-term strategic implications of his opportunism.

So far the theory. I really thought it was unnecessary to add that one never should make a fool of him- or herself by using such unfounded arguments that they raise doubts about the capacity of the person uttering these to perform his or her profession. Not to mention wasting the magistrates time with this wrong kind of reasoning. The State Attorney’s most recent attack is formally going nowhere and is materially in the wrong place.

Last Friday, on April 15th 2016, we sent a document with allegations, as a result of another document presented by the State Attorney, to the Supreme Court. The document of the State Attorney refers to a report of the European Commission with merely consultative value which was requested in a procedure of Anpier to the Committee of Petitions of the European Parliament, being the procedure not even concluded. The attorney draws the conclusion that undertaking  any legal action against Spain regarding the electricity reform of RDL9/2013 should not be taken into account, suggesting to file the proceedings.

The document which was provided by the State Attorney is a report of the European Commission which was requested by the Committee of Petitions of the European Parliament (PETI), and it does not prejudge the final decision of the Parliament regarding the petition. In other words, it is not right to affirm that the European Parliament rejects the petition. The European Commission has issued a report, which, I insist, is not binding, it solely expresses its view on this matter. Of course, this document has even less incidence in the procedure of which the concerned State Attorney is in charge of. We can safely say that its incidence in our procedure is absolutely null.  

I know this procedure very well, because I have had the honour to defend various petitions before the PETI, of which one had the same aim as the above-mentioned one. I have also had many meetings with various General Directions of the European Commission in Brussels in order to discuss the several complaints we have filed. Most are still to be resolved. The aforementioned are different institutions, each one with its weight and importance, but none of them can be put in the position of the Court of Justice of the European Union. The Court of Justice of the European Union has the exclusive competence to interpret European Law.

This clear sample of lacking knowledge about the basic operation of the European Union on behalf of the State Attorney is amazing and makes one possibly wonder about the reasons that motivate him for the constantly growing number of documents he is presenting in order to stop the magistrates of the Supreme Court from getting to the procedural moment to submit questions for a preliminary ruling of European Law. In his last writing, the State Attorney plays dumb and, by means of a childish argumentation, tries to impede getting to European Justice. He must be really scared for getting there, and I am starting to doubt whether the reason is his fear to lose or to look ridiculous. 

The original version of this article was in Spanish and was published here.

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The orginal version of this article is in Spanish and was published here.

Persistence

In order to win a trial, persistence in the effort is needed. It is possible to go through different instances, appeals, cassations, exceptions of unconstitutionality and preliminary rulings of European Law, just to give some examples. Even there is the possibility to go to the European Court of Human Rights in Strasbourg. 

When we defend ourselves against a relentless campaign to demolish the renewable energy sector in Spain, the persistence in one or other trial is not enough. We need perseverance in the global goal, and we need to promote all the necessary trials to return legal certainty to our sector. 

Perseverance

We have focused on perseverance from the start, proposing a global and exhaustive strategy. We approached it from the scope of European Law and we have always said that the Court of Justice of the European Union will be the one to have the say the last word. This strategy has supposed an exhaustion of all the routes within our grasp, with different success possibilities among them. 

Review of the different battles

The recent dismissal of the reclamation for pecuniary responsibility that we lodged in 2011 regarding the damages caused by Royal Decree 1565/2010. We already said it was a troublesome reclamation, as it implies a proof load over a forthcoming damage. That is the reason why we added it to the actions included in our economic proposal for the defense against Royal Decree-Law 14/2010. 

The card-sharp play

In our opinion, the indirect contestation of RDL 14/2010 had more success possibilities, because of its high arbitrariness grade and its discriminatory result. We have contested RDL 14/2010 in an indirect form through the Circular 3/2011 of the CNE, a trial which still today is waiting for a specific date for voting and verdict of the Supreme Court, in cassation. Because of the doubts that appear regarding European Law application, the Supreme Court has the obligation to set out preliminary rulings, as the sentence dictated by the National Audience is based on European Law, but quoting obsolete regulations and jurisprudence, and it is manifestly wrong in its reasoning and its alleged application of European Law. 

When the combination of regulations of RD 1565/2010 and RDL 14/2010 appeared as an authentic play of the card-sharp regulator, with the subsequent approved electric reform of José Manuel Soria, at the moment, the goal of both has come across. It is a card-sharp play, since it seems hermetic, in the sense that it is dressed as a relocation of the remuneration, not a cutback. It pretends to be a financial operation, compensated by something that in the past was mine, but which I only can quantify with certainty in fifteen years from now. 

Slip-up

At this point, litigations against the electric tax of Law 15/2012 are entering the dispute phase and the State Lawyers do not even seem to try to defend themselves. The good question here is that at a material level the consultants of the own Government (Comisión Lagares) and the European Commission have existential doubts about the viability of this tax. 

Constitutional Court Rulings 

In December of 2015 a ruling of the Constitutional Court about RDL 9/2013 was dictated, and in February of 2016 another ruling dictated by the same tribunal appeared about Law 24/2013. These rulings have created discomfort among the Constitutional Court, resulting in a particular vote with two adhesions criticizing the deep shortages in its reasoning. 

Moreover, both sentences do not talk about the reform in its execution, but only in its plan. In abstract terms, the idea of this reform does not have to be contrary to the law, and it does not have to let down the legitimate expectations of the interested. I say this in a hypothetical way, putting aside the serious practical problems of arbitrariness presented by the methodology used by the Government. As it happens in many fields of life, it seems easy to plan panacea solutions from the ignorance. Once they have to be started up, because of its arbitrary execution, they stumble upon the rule of law and other frivolities of trivial life. 

These problems have not been object of scrutiny by the Constitutional Court, and they are still under a detailed analysis by the Supreme Court. This Court is considering whether it is appropriate to raise unconstitutionality questions, and it has asked us as complainants to express our opinion about the incidence that the first of the mentioned sentences may have in our litigations. What seems clear is that even the dissident magistrate is confused with the legitimate confidence. It would be difficult for him to maintain that this principle requires an individualized and detailed analysis and at the same time saying that he would have finished with the same sentence pronounced by the other magistrates when the most essential part to carry out this individualized and detailed analysis was not part of the sentence, as it was contained in the Royal Decree 413/2014 and the Ministerial Order IET/1045/2014. 

Let’s focus on the execution of the most recent reform

We have reached the impugnation of Royal Decree 413/2014 and Ministerial Order IET/1045/2014. These proceedings are in its final phase, after the ratification of more than 300 expert reports, among the ones has stood out the report made by our expert Alberto Ceña, made over the most exhaustive sample of all the presented reports. The thing that has been stressed out most in our ratifications is the concept of the sunken costs, with deep investigations by the magistrates of the Supreme Court. It is here where it will have to distance itself from the reasoning of the Constitutional Court, which maintains from a simplistic point of view that the interested would have adapted to the technological evolution and so they would not need such or no retribution. Here we can clearly see what happens if we confuse the individual position in time with the position of a sector in a temporal window. 

Luxembourg

The Supreme Court, in repeated occasions emphasized the lodge of preliminary rulings, which were insisted by us as the petitioning party, and accepted as necessary by the defense. The legitimate confidence and the highly arbitrary approach of this reform will need to be analyzed in application of the jurisprudence of the European Union Court of Justice. 

Brussels

By mid-2015 the Spanish State initiated a new strategy in order to neutralize its opponents in international arbitrations and national trials, both with aspirations to reach the European Union Court of Justice. Ones through MICULA doctrine and others through its normal procedural development. We are talking about an auto-complaint through a late notification of the last electric reform as a possible constituent of State-aids, with its posterior extension to the Royal Decree 661/2007. At first, the State Attorneys received instructions to use it as a leverage to suspend the procedures in the Supreme Court, branded by part of its magistrates as improper and premature. Ultimately the Government is trying to ratify its cutbacks through a State-Aid expedient.  

Non-notified state-aids, or notified after the passing of the regulation, which is more or less the same, are automatically illegal. Despite this illegality, these aids may be compatible, something which would result in a legalization of the status quo. That would mean that these aids will not need to be returned. The trick is in the details, if it was considered that the initial retribution was over-compensated and the current compatible, the legal fundament to plead legitimate confidence could be weakened.  

I have been told from Brussels that they are not going to decide over the opening of this expedient before the investiture of a new government in Spain. Others have told me that the Directorate General for Competition prefers to close the preliminary investigation without the opening of the expedient, and that Commissioner Cañete is lobbying in the opposite direction. But they are all rumors. But it is important to bear in mind that Brussels does not have the final say here, as this issue would ultimately be sent to the European Union Court of Justice.

The difference between persistence and perseverance

The difference between persistence and perseverance is in the continuity of the action. Losing battles cannot demotivate you, you have to feed your perseverance in order to insist in a stronger way in the work that this supposes. The objective of such a strategy cannot be to win it all, it must be focused in winning the decisive battles. It is important to work with a cold head each and every of the lines that may help even if in some cases it my only be useful to stretch other lines in the wanted direction, because our opponent is doing the same thing. I am as convinced as in the start, and I saw coming all the difficulties commented in this article, and it is because of these difficulties that we are following this strategy.

The only one that I did not see coming is the State-aid file, partly because it is born from a doctrinal change which took place meanwhile. But its “europifying” effect works to our advantage, and I believe we also have good legal and technic-economic arguments to defend ourselves adequately in the content of this file. As you have been able to see in the development of this article, our perseverance has driven us to the middle of Europe, with Luxembourg on our way. Now the most important part is to come, to travel this last mile to the Palais de la Cour de Justice in the Boulevard Konrad Adenauer in Kirchberg, Luxembourg.

 

Daniel Pérez Rodriguez

www.holtropslp.com

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On February 25th 2016, a vast parliamentary majority (all the political parties except PP and UPN) publically shared their commitment, to eliminate the main obstacles to self-consumption during the first hundred days of Government. In this article I will analyse the procedure agreed on, the content of the legislation, the timing of the changes and the different options for action for those affected by the current legislation.

How?

According to the referred agreement, the new Government, once it has taken office, will adopt a Royal Decree-Law with the articles annexed to the agreement, which will be validated later in Parliament, with the favourable vote of all the signing parties. As a regulatory instrument, Royal Decree-Laws should be used only if strictly necessary since the Government may do so without consulting anyone. However, since the text of this Royal Decree-Law has been agreed upon by the majority of the parties with parliamentary representation, we consider this justified. Such Royal Decree-Law would respond to the situation of extraordinary and urgent necessity of revitalising the renewable energy sector in Spain, devastated after the four years of “anti-renewable energies“ Government of the Partido Popular (according to the Spanish Photovoltaic Union UNEF, only two self-consumption installations have been registered in Spain since October last year).

What?

Following their commitment of July last to repeal the Solar tax in case it would finally be approved, the signing parties have agreed articles for the Royal Decree-Law which imply the removal or reduction of the main obstacles to self-consumption, both the  technical-administrative ones (connection request, self-consumption register, unreasonable penalties, impossibility of shared self-consumption) as the financial ones (fixed and variable charge). The Royal Decree-Law would change some articles from the Electrical Sector Law related to self-consumption and repeal the most harmful dispositions for self-consumption of Royal Decree 900/2015. It would even be possible to regulate net metering. We are talking, therefore, about a framework for the development of a self-consumption regulation in accordance with the rest of our European neighbours, which contrasts with the current framework, qualified by the International Energy Agency as the most restrictive of the world.

When?

The legislative process will consist of two phases. The first will be the approval of the referred Royal Decree-Law, which will take place during the first 100 days of Government, according to what has been established in the political commitment document. Therefore, the question is when Government will be formed, something that is, obviously, unknown at this time. It is clear that there is no self-consumption without Government.

The second phase will be the adoption of a Royal Decree to develop the Royal Decree-Law, to be agreed upon by future Government together with the rest of the political parties and with the social organisations. This Royal Decree would replace the remains of Royal Decree 900/2015 and would develop, among others, the specific regime of net metering or shared self-consumption. In order to achieve this, several months of negotiations and going through the CNMC (the National Markets and Competition Commission) and the State Council are still needed.

 

And meanwhile, what?

All of this sounds great. But the brave people who already have solar panels on their roofs or that, despite everything, are considering installing panels, will wonder what to do as long as the political situation is being clarified and the legislative changes are taking place.

For existing installations, the regulation arrives somewhat late, since it is unlikely that by April 10th, the moment in which the transitory period of Royal Decree 900/2015 finishes, the new Royal Decree-Law will appear published in the BOE. Therefore, some doubts arise about if it is worthwhile spending money on an electricity meter for the self-consumption installation, requesting (and paying for) the connection point to the distributor or registering the installation in the Self-consumption Register, especially bearing in mind the high number of penalties for breaching the self-consumption regulation. The decision will depend on the risks one is willing to assume. The wisest thing to do is to complete all the possible procedures to comply with RD 900/2015 before  April 10th. If any document would be lacking by then, it would be advisable to register the installation and posteriorly remedy possible defects. All this bearing in mind the political process, because if in the next days Government would be formed and the legislation would finally change, this change would retroactively benefit the existing installations, and would be applied to the penalty procedures that might have been initiated because of noncompliance with the previous legislation.

 

In the end, the parliamentary agreement published last Thursday is important to put an end to the irregular Spanish legislation in terms of self-consumption. Now it all depends of the fact if Government is formed or not in the next weeks, and that this Government is not Partido Popular. And once there is Government, will it then finally be possible to develop self-consumption? This time it seems, for a start, it may be the case. 

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This article was originally published in Spanish at www.energias-renovables.com.

There are countries without Constitutional Court. An example of this is Holland, my birth country. In The Netherlands there are calls standing up for establishing one in order to achieve a higher control of constitutional legality of laws, and other ones saying this would not be convenient. Dutch judges of ordinary jurisdiction can directly assess the constitutionality and its compliance with international agreements of all the regulations that are not approved by the Parliament and the Senate, in other words laws. Regarding laws, they can only assess its compliance with international agreements directly. 

This system can be criticised at several points. For example putting too much in the good performance of the two chambers as far as the correct compliance of the constitutional procedures is concerned, but a more stringent implementation of the separation of powers can also be appreciated. A less academic and more practical effect is the length of the procedures, which is quite quickly in comparison with constitutionalist systems, as the judges of the ordinary jurisdiction are more used to base their sentences in the fundamental rights as included in the international agreements, and  to submit questions for a preliminary ruling of European Law.

It is right in this last point where I wish to insist with a view to the sentence of the Constitutional Court resolving the appel promoted by the Community of Murcia against the Royal Decree-Law 9/2013, and which we knew yesterday. Apart from being rejective, it is a succinct and not well argued sentence, to the point that the particular vote criticises this. Bearing in mind its delay, the lack of solid reasoning is even more reproachable.

But if we look at it from the point of view of the Supreme Court, it can also be considered that it arrives in a really appropriate moment. This, obviously, leaving apart the discomfort that the magistrates may feel because of the lack of courtesy and coordination by the Constitutional Court or by the Spanish Government, who in an unusual act of leaking, published a press note in order to distort the decision of the Supreme Court, warning about its intention raise out constitutional questions .. No, the timing is good for the quickness of the occurrences. I will explain this.

The Supreme Court has clearly come to the conclusion that there may be constitutionality problems, or said in a more concrete way: the Supreme believes that the last electricity reform may have infringed the principles of prohibition of retroactivity, legal security and legitimate confidence. What happens is that, as well as in The Netherlands, the Supreme Court also has to assess these infractions in ordinary jurisdiction, basing its response in the European Law version of these principles, making use of the procedure on judicial cooperation as defined in article 267 of the Treaty on the Functioning of the European Union and submitting a question for a preliminary ruling of European Law to the European Court of Justice in Luxembourg. In fact, our Supreme Court already warned us in the same decision, by stating: “All of this, notwithstanding future agreements about a possible submitting of a question for a preliminary ruling to the European Court of Justice”.

This for the timing: the word “future” in the publication date of this decision still seemed to be referring to a few years, when our Constitutional Court would have resolved these questions with extraordinary intellectual efforts and maximum celerity, which now seems could happen before this summer. In these  terms, all this fuss does not upset me, I prefer not to fight an already lost battle for another one, and to concentrate in another more important one, with a good disposition of the Supreme Court allowing us to enter this battle field, in both material and formal sense. 

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The Dutch Ministry of Foreign Affairs organises on Wednesday, December 16th a small meeting about the current political events in Spain. Together with several company representatives, think tanks and other distinguished personalities we wish to discuss the opportunities and challenges that Spain is currently facing. We will start the meeting with a presentation on the upcoming national elections by the former correspondent Merijn de Waal (now editor at the Dutch newspaper NRC), followed by a presentation on Spain's energy policy by Anna Herranz-Surrallés (University of Maastricht). After that we will enter into a discussion with a panel on the opportunities and challenges for Spain in the coming years, including the political uncertainty in Catalonia. Léon Cornelissen (Chief Economist at Robeco), Maartje Wijffelaars (Risk Analyst at Rabobank) and Piet Holtrop (HOLTROP S.L.P Transaction & Business Law) have already confirmed their participation in the panel.

We would like to invite Dutch companies and entrepreneurs operating in Spain to attend the meeting. The programme starts on Wednesday, December 16th at 10:30 am and finishes at 1:30 pm (including lunch). For more information on how to participate, please contact Amanda Molenaar, by email at:  This email address is being protected from spambots. You need JavaScript enabled to view it. or by phone at: +31 70 348 6875.

Josep Maria Ribalta Pijuan

www.holtropslp.com

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We have just gotten knowledge of the coverage ratio regarding the eighth FIT settlements of 2015. In this case, the percentage, which has been set at 87,15%, is nearly seventeen points higher than the applied in the same month of 2014. 

We will continue informing you about the evolution of the coverage ratio during this year. 

 

Settlement

Month

Coverage Ratio 2014

Coverage Ratio 2015

1

January

25,40%

29,27%

2

February

44,77%

60,24%

3

March

55,56%

68,68%

4

April

57,23%

 76,30% 

5

May

58,07%

76,31%

6

June

60,49%

82,64%

7

July

69,59%

83,98%

8

August

70,33%

87,15%

9

September

72,55%

 

10

October

78,92%

 

11

November

79,71%

 

12

December

84,08%

 

13

Full year

91,11%

 

14

Full year

97,04%

 

 

 

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Last Saturday morning, October 10th 2015, Royal Decree 900/2015 dated as of 9th of October, which regulates the administrative, economic and technical conditions for those modalities of electricity supply based on self-consumption and production with self-consumption was published in the Boletín Oficial del Estado (Official Gazette). According to its seventh final provision, the Royal Decree (hereinafter also referred to as ‘RD’) enters into force tomorrow, Sunday 11th of October 2015, and the deadline for contesting it finishes on the 10th of December 2015, that is, before the general elections to be celebrated on the 20th of December of the same year. According to the third transitional provision, self-consumers qualified as type 1 or 2 in the RD, with facilities being operative before the entry into force of the RD, are given a transitional period of six months to adapt to the provisions of such regulation. This term would expire on the 10th of April, i.e. well after the elections. If as a result of the elections a different party comes into power, there could be a chance to follow the fastest way to repeal the current wording of the RD and thus prevent the damage that its provisions seek with their implementation. Before the elections there are still many opportunities for the current opposition parties to express their disagreement. For instance in Valladolid, on Friday 16th of October 2015, UNEF is organising a free day where all agents interested in the photovoltaic sector that takes place in the Autonomous Community of Castilla y Leon and the Spanish legal framework, are invited. The programme includes a first discussion on self-consumption with companies located in the Autonomous Community of Castilla y Leon, a second discussion with social stake-holders - trade unions, consumer associations and third sector associations - and finally a political agenda. We will participate in the first discussion presenting the paper "Legal framework of self-consumption in Castilla y Leon and regulatory changes in the reform of the electricity sector", and are sponsoring the event in general.

UNEF has expressed its unequivocal opinion on the RD: the government insists preventing the development of self-consumption in Spain. UNEF insists that the government has approved the RD isolated from other political parties, the civil society and institutions. To UNEF, the legislation does not provide the Net Balance, the most knowledgeable modality in the world. Instead, small self-consumers are forced to give away the energy that they do not consume to power companies. UNEF underlines that self-consumers connected to the grid are already paying the same system tolls as any other consumer: the entire fixed portion, and the portion corresponding to the energy that they may demand from the grid. According to UNEF, with this legislation the Government imposes an unjustified barrier to the economic development of self-consumption in Spain. We could not agree more with UNEF. And, as reported by the journal ‘Periódico de la Energía’, the rest of the Spanish society also agree with UNEF, apart from the government.

Returning to beginning of this post, the time limit for contesting the Royal Decree will expire on December the 10th, and we will certainly contest it. At this moment we are working in two directions; firstly, we are preparing our strategy to overthrow the RD. My partner Daniel Perez already anticipated yesterday at Energynews that "Firstly one we must wait for the Royal Decree to be published in the Official Gazette, which will happen in a week time, and then we shall put together the reasons to appeal. Regarding the appeal itself, there are two possible ways to submit it: on the one hand, before the Supreme Court since the RD violates some points of the Electricity Act passed by the same government; secondly, a complaint should be also submitted to Brussels given that the RD contravenes European law and policies”. Where Daniel says "or", I already say "and", since I understand that we must do both. As a matter of fact today we have received instructions to that effect from the Assembly of Plataforma Por Un Nuevo Modelo Energético (Platform For A New Energy Model). No need to say that we will carry out this work, as always in close collaboration with UNEF, APPA, Fundación Renovables (Renewables Foundation), ANPIER and all other individuals and organizations who want to support it, such as SECARTYS. Secondly we are considering a formula that allows us to represent self-consumers who have facilities already operating, before the Supreme Court. It would consist, as always in a formula that seeks an affordable price divided among all interested parties, which can be called "Crowd-litigation". We hope to publish both the Crowd-Litigation formula and the first lines of our legal strategy before the end of this week, i.e. before the UNEF free day in Valladolid. We already have several self consumers who signed up for this scheme before knowing the details. We will work together closely with them to determine the parametres of this scheme. 

We will publish a first outline on the ins and outs of RD 900/2015 at the end of this week, or early next week, together with its legal pitfalls, and most of all of course why we think that it may be effectively challenged before Court and the European Commission. 

 

 

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At 13:30 the press conference starts following the Council of Ministers held on the 9th of October 2015. Presumably, Royal Decree on Self-Consumption has been approved during the Council meeting. Let's see if that`s true. Minister Soria has joined the press conference; that could be a sign confirming the rumours. In this precise moment, Vice-President Soraya Saenz de Santamaría is explaining other Government measures. 

At 13:26 Minister Soria announces the approval of Royal Decree on Self-Consumption. Allegedly, such Decree is conceived to promote the renewable energies. The first modality of self-consumption does not supply energy to the grid; for the second modality, electricity generated for self-consumption can be effectively supplied to the grid. Therefore, the existence of two modalities is now acknowledged: on the one hand, there are the facilities conceived for only self-consumption (with a capacity not higher than 100 kw); for this modality, the additional kw generated can be discharged to the grid but cannot be sold. The second modality consists in the self-consumption and supply of energy to the grid. This latter modality includes those facilities with a capacity higher than 100 kw, which shall be registered in the Register of Electricity Producers. 

According to Soria, the question is whether self-consumers have to pay. The Minister has clarified that self-consumers will not pay for the electricity, without taking into account the fact that the self-consumer has to borne the costs of purchasing and operating the assets that generate energy. Afterwards, Minister Soria has explained that the electricity tolls and the supporting costs shall be borne by the self-consumer. Under the Royal Decree, Self-consumers will not pay for the energy, nor will pay the electricity tolls and taxes when self-consumers are not connected to the grid. Soria states that, regarding the electricity tolls, self-consumers shall pay as much as they consume, contributing to and encouraging the renewable energies as any other consumer. 

Minister Soria explains that the report issued by the Council of Ministers endorses the contents of the Royal Decree, which complies with the current legal framework. Given that such report has not been made public, this specific issue cannot be verified yet. At Holtrop S.L.P., we are now studying the draft leaked yesterday by the newspaper "El Economista" and we will issue our first analysis on this matter as soon as possible. 

With this brief intervention, the Minister's explanation on the Royal Decree has concluded. At the moment, he is answering the questions regarding DieselGate. 

At 13:55, the press conference has concluded without any additional explanation on the Royal Decree on Self-Consumption. We shall await for the issuance of the Royal Decree in order to analyse it together with the aforementioned draft. 

From the date in which the Royal Decree on Self-Consumption is released and made public in the State Official Gazette (Boletín Oficial del Estado), one counts with two months to appeal such Royal Decree and submit any preliminary references on the compatibility of the Royal Decree with the European legal framework. 

The reference of the Council of Ministers on this issue has already been published: 

THE REGULATION OF ELECTRIC SELF-CONSUMPTION HAS BEEN APPROVED

A legal frame has been established to allow the development of self-consumption in an orderly manner, guaranteeing the security of the electricicity system. 

Self-consumption offers great benefits: it allows the penetration of technologies which do not emit CO2 and reduces the losses associated with electricity transport, since it consists in a distributed source of production. 

The Council of Ministers has approved a Royal Decree which regulates the administrative, technical and economical conditions for the supply and production of electricity by self-consumers. The Royal Decree establishes a normative frame where the economical sustainability of the system and the correct distribution of the system's fees are guaranteed. 

The self-consumer, who could also be called "self-generator", is a consumer who produces part of the energy consumed by it. Self-consumption offers important benefits: the usage of renewable energies, the avoidance of oil import, a greater respect for the environment and the reduction of CO2 emissions. 

This Royal Decree regulates for the first time an activity bound to the progress of a technology which nowadays allows small self-consumers to produce and consume their own electricity, using renewable energies instead of fossil fuels. 

Self-consumption does not mean energy efficiency, since consumption as a whole stays the same; nonetheless, energy can be generated in a more distributed way. 

Appropiate distribution of the system's fees:

The new regulation states that those who produce and consume their own energy without being connected to the grid, do not have the obligation to pay any cost of the electricity system, as they do not use it.

In case one is connected to the grid, it will always have the supply guaranteed, even when the self-produced energy was not enough; for instance, when the sun does not shine or the wind does not blow. A self-generator connected to the electricity system will neither pay for the self-produced electricity, nor for the associated taxes and the system's losses. However, this self-generator will have to contribute to the general costs of the system mainly arisen from: the solidarity with the extra-peninsular systems, where production is more expensive; the past-generated debt; the bonuses to renewable energies; and the supporting costs.

Should self-consumers not contribute to the general system's costs, those costs would have to be distributed between the rest of the consumers who do not self-consume, increasing significantly the bill. That would create an unfair situation, since the general costs of the system have nothing to do with self-consumption. Moreover, such would be a regressive situation where the most vulnerable consumers are those ones with more obstacles to practice self-consumption.

Nevertheless, the principle stating that all consumers shall contribute in the same way to the general costs of the system has two exceptions: 

On the one hand, consumers located in the islands. In these territories, self-consumption does allow to reduce the production costs, providing great savings to all consumers. 

Secondly, small consumers of a contracted capacity not higher than 10kW. 

Guarantee of the security in the electricity system for all consumers: 

The wording of the Royal Decree completes the creation of a register of self-consumption facilities for all operators and the distributing companies. This register provides information on the production facilities connected to the grid and guarantees the right operation of the electricity system in safe conditions. 

The Royal Decree gives a period of six months to consumers, facilities and other agents to adapt to this regulation.

Energy production technologies, and specially the renewable energies, will continue decreasing their costs. The Royal Decree enhances the progressive introduction of self-consumption into the market, making it an everyday more essential part of the electricity system.