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One of the key barriers identified by developers in respect of the deployment of storage systems is the lack of definition and clarity in relation to certain administrative procedures and the necessary criteria for project permits projects.
To overcome this issue, Measure 1.5 of the Energy Storage Strategy (“ESS”) published on February 2021, that Measure 1.5 explains how the regulatory framework for storage will define, among other things, the authorisation process for permits for these types of facilities. It is envisaged that this will simplify administrative procedures and reduce the administrative burden on developers. The ESS promotes regulatory modifications, within the scope of different public administrations, to facilitate the management and obtaining of aid, permits and licenses.
In addition, Royal Decree 1183/2020[3] regulates access to the grid for storage facilities, treating them as electricity generation facilities and allowing co-location of new or existing production plants with storage systems. Accordingly, a stand-alone storage facility will require the processing of new access and connection permits to inject energy into the grid. A storage facility connected to a generation facility will be able to export energy to the grid using the same access and connection permit as the generation facility to which it is connected.
While the initial steps have been taken to introduce a framework to enable storage projects into the legal system in line with the European Directives, ultimately the regulatory framework will need to be reformulated to enable the technologies’ full integration into the energy system. It will be important to ensure the that the storage facilities are allowed the same benefits and considerations as electricity generation facilities.
The declaration of public interest may be made either at the same time or after having obtained administrative authorisation for the storage facility. Indeed, it is possible, and most common in practice, for the declaration of public interest to be processed at the same time as the application for administrative authorisation of the site.
Renewable energy projects, including storage facilities connected to the grid, are subject to an environmental impact assessment (Evaluación de Impacto Ambiental) which concludes with an environmental resolution/statement aimed at determining whether a project is compatible with relevant environmental legislation and, where applicable, setting the protection and prevention mechanisms to be implemented in order to ensure the compatibility of the project with the such legislation.
The environmental assessment procedure usually begins with consultation by the developer in respect of the storage facility with the stakeholders responsible for the potentially affected areas (e.g., hydro domain, road infrastructure, cattle roads). The consultation will aim to secure the requisite land rights or to obtain similar rights (e.g., surface rights) from the landowners where the storage facility is to be installed.
To aid this process, the Ministry for Ecological Transition and the Demographic Challenge developed the Environmental zoning for renewable energies: Wind and Photovoltaic. This is a tool that helps identify areas of the country that present the best environmental conditions for the development of electricity storage projects, enabling developers to make strategic decisions with respect to the location and design of these projects.
Given that this is still a nascent area, there are still regulatory obstacles which will need to be considered before electricity storage facilities can be fully integrated into the energy system. Indeed, there are a number of considerations in relation to the profitability of storage facilities, including the possibility for standalone facilities to sell back the energy in the electricity market or the possibility for payment of subsequent transmission fees.
For example, when considering the price of the energy purchased, a stand-alone storage facility can benefit only from the price variation at the time of sale. Conversely, co-located storage facilities will be able to capture the discharge of the renewable facility at times when it is not possible or economically feasible to discharge the energy to the grid, moving the discharge to a later time when the market price is higher. Therefore, it is expected that in Spain co-located of storage with other renewable technologies will be pursued more than stand-alone projects.
In the case of PPAs, the implementation of a storage facility adds complexity to the functioning of the settlement of contract prices, particularly in relation to contracts for differences. This is an area that will need to be explored in the Spanish market.
The development of storage facilities in line with the objectives of the PNIEC may also require the participation of the public sector. Spanish public bodies tend to get involved in storage projects during innovation and research stages and not at the commercial level. The impact of developing electricity storage projects with a public administration or an entity subject to public procurement regulations will need to be considered.
In Spain, the legal regime for tenders, awards, effects, fulfilment and termination of public sector contracts set out by the Public Contracts Law[5] will apply when entering into any contract with public bodies or entities related to the public sector. The specific allocation procedure and applicable regime will depend on a variety of factors, including the type of contract, the contracting entity, whether they are subject to harmonised regulation and whether their effects and termination are subject to private or public law.
Furthermore, when entering a contract with a contracting entity (except for Public Administrations) in the energy sector, the provisions of Royal Decree-Law 3/2020[6], which apply to other awarding entities; public companies; and private entities that have special or exclusive rights to provide services and activities related to water, energy, transport and postal services sectors, are also relevant.
In relation to lithium-ion batteries, lithium mining projects are being proposed around the country and some companies such as Iberdrola already use lithium-ion batteries in their solar systems. Furthermore, the government has recently announced plans for two battery gigafactories as currently the country has little battery manufacturing capacity.
Although the energy storage industry in Spain is focusing on battery storage, there is also a possibility to increase pumped storage capacity. However, there are various challenges associated with developing these projects in Spain, including social and environmental impacts, and the timelines associated with such projects.
[4] Royal Decree 1955/2000, of December 1, 2000, which regulates the activities of transmission, distribution, commercialisation, supply and procedures for the authorisation of electric energy facilities.
[5] Law 9/2017, of November 8, on Public Sector Contracts, transposing into Spanish law the Directives of the European Parliament and of the Council 2014/23/EU and 2014/24/EU, of February 26, 2014.
[6] Royal Decree-Law 3/2020, of February 4, 2020, of urgent measures by which several European Union directives in the areas of public procurement in certain sectors; private insurance; pension plans and funds; taxation and tax litigation are incorporated into the Spanish legal system.
[7] Order TED/1447/2021, of December 22, approving the regulatory bases for the granting of aid for innovative energy storage R&D projects within the framework of the Recovery, Transformation and Resilience Plan.
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