Spain: Orden TED/526/2024 changes the operating support methodology for fuel-dependent plants

On 31 May 2024 the Spanish ministry issued Orden TED/526/2024, which establishes a methodology for updating operating support (retribución a la operación, Ro) for standard installations whose operating costs depend mainly on the fuel price. It covers biomass power plants, among others. The new Ro values apply from 1 January 2024, and the text was published in the BOE on 4 June 2024.

How support works under the specific regime

The Spanish specific regime consists of investment support and operating support. The latter is meant to cover the difference between operating costs and market revenue, including fuel costs. Until now Orden IET/1345/2015 set the methodology for updating Ro; Orden TED/526/2024 repeals it and replaces it with a new one. Earlier interventions, such as Real Decreto-ley 6/2022 and 10/2022, changed how deviations from the market price are calculated and forced a revision of the Ro methodology, which was finally carried out in 2024.

What the industry criticises

According to the association APPA Renovables, cited by the portal Energías Renovables on 6 June 2024, the new methodology assumes an increase in operating and maintenance costs of 3% over the last three years, which is below inflation. APPA claims that real costs rose by more than 40% over that period. The association also points out that the parameters assume a biomass purchase cost of EUR 58/t, whereas the actual cost is about EUR 70/t, or more than 20% higher. It states that power plants spend EUR 85–95/MWh on fuel alone.

Price background

According to the same source, the average electricity market price in April 2024 was EUR 13.67/MWh, compared with EUR 167.52/MWh in 2022. At such low wholesale prices, market revenue does not cover fuel costs, so it is operating support that determines profitability. APPA warned that some power plants had operated at a loss for several months because of the delay in approving the methodology, and estimated the risk to more than 30 thousand jobs. This is the position of an industry organisation, not an assessment by the government.

Rising biomass prices

The industry linked the rising cost of biomass to the increase in gas prices after Russia's invasion of Ukraine and EU sanctions, which made biomass an attractive substitute fuel. In this context the organisation called for an urgent update of the parameters so that they reflect real costs.

Consequences for generators

For generators, the key point is that Ro is updated periodically using a methodology linked to fuel prices, and is therefore not a fixed rate from 2014. The exact Ro values for individual standard installations are published by the ministry in subsequent updates. If you plan to compare with Polish prices, see reference prices in the 2023 RES auctions.