Energy Self-Consumption: Legislation and types of self-consumers connected to the grid

In our previous post we introduced the concept of energy self-consumption, where we explained what kind of facilities exist, and what benefits Pylon Network can offer to the owners of these assets.

In this second part, we will talk about the types of self-consumers connected to the grid and how they affect (and are affected by) current legislation in Spain.

Part 1 - Energy Self-consumption: Introduction.
Part 2 - Energy Self-consumption: Current state legislation and Types of self-consumers connected to the grid.
Part 3 - Energy Self-consumption: Domestic.
Part 4 - Energy Self-consumption: Industrial.

Part 2 - Energy Self-consumption: Current state legislation and Types of self-consumers connected to the grid

On October 9, 2015, the long-awaited Real Decreto 900/2015 regulation came into effect, regulating the different types of electric energy with regards to self-consumption.
Until then, it was only possible to sell the generated energy (one could not self-consume his/her own energy). You had to inject all your generated energy into the grid and hence, being consumed away from its source of generation and, at the same time, you had to buy all your energy from the grid - without knowing where it came from.

In other words, you could have a solar panel (PV) installation in your house selling energy and obtaining a small payback for it, while the energy that you consumed had to be bought from the network with its corresponding mix of coal, gas, nuclear, wind, photovoltaic, biomass, cogeneration … for which you paid a much higher price - about 3 times higher than the price at which you sold your self-produced solar energy. If this sounds confusing is because it is - a complete nonsense!
Economically this system was only viable with the incentives that the government put in place during 2007, paying 11 times (!) higher price (about 0.45 € / kWh) per kWh injected, compared to the market price - exorbitant incentives that were completely unsustainable and of course, were cut drastically in 2010.
With the arrival of RD 900/2015, the possibility of self-consumption of electricity, opened up. That is, you can avoid paying the electric company for the energy that you are consuming from your own generation facility (e.g. solar panels), paying only for the energy that you consumed from the grid. It sounds more logical compared to the previous regulation (and it is!), however, devil is on the details!

So let's look a bit closer on the regulation, which defines two types of self-consumers - Type 1 and Type 2

Self-consumer type 1

It is the type of self-consumer that would benefit a domestic installation or a SME up to 100 kW of photovoltaic power.
– The surplus energy will be delivered to the grid without receiving any financial support, requesting and covering all costs regarding the connection study to the distributor or, otherwise, they must have an non -injection system (thus avoiding the injection of surpluses into the network).
– You must register in the administrative record of self-consumption.
– The facility must be approved by the Territorial Industry Service and comply with the regulations of the corresponding distributor (depends on which part of the grid you are connected to).
– Those users with contracted power of less than 10 kW are exempt from paying the charges for self-consumption, known infamously as the "Sun Tax". North of 10 kW, these tolls must be paid according to their tariff and period.

Self-consumer type 2

It is the type of self-consumer that would be supported by a large company without maximum photovoltaic power while it is below the price contracted by the supplier of electricity.
– The surplus energy can be sold at the pool price, assuming the toll surcharges for generation (€ 0.0005 / kWh) and the 7% tax on production (€ 0.0035 / kWh).
– You must register in the administrative record of self-consumption.
– The facility must be approved by the Territorial Industry Service and comply with the regulations of the corresponding distributor.
– The installation must also comply with the connection and access procedures according to RD 1699/2011 and 1955/2000.
– Sun tax: you must pay the charges corresponding to the rate and period for the self-consumed energy and power, if you have batteries.

The RD 900/2015, instead of facilitating and adequately regulating self-consumption, it makes it more difficult. The necessary procedures to legalize an installation, added on top of the regulatory costs for self-consumption itself, become a strong financial barrier for the implementation of distributed renewable energy sources.
Since the publication of the RD, numerous political parties and environmental/energy associations have turned against and pursued it, raising the conflict to the national highest courts and the European Commission.

What is the 'sun tax'?

The sun tax is the controversial name that has been given to the tolls / charges for self-consumption of energy. The argumentation behind it is that by self-consuming our own energy we stop paying the network tariffs related to the electricity transportation and maintenance of the gird, as well as a lower collection of VAT and electricity tax.

The reality is that this component in terms of transportation and maintenance of the network , we already pay in fixed term power, we will continue to pay even if we install self-consumption … moreover it is also demonstrated that the VAT and taxes associated with the creation of employment that generates the installation of renewable energy resources, etc., is enormously greater than the amount that the sun tax implies …

So.. what should we expect in the future?

With the legal and social pressure of organized, active citizens and combined with the recent change of government in Spain, it is expected that the sun tax will be eliminated and both self-consumption facilities will be technically and administratively facilitated in the market. At the beginning of June 2018, a draft was published to facilitate regulations regarding the shared self-consumption facilities and with the arrival of the new Minister of Energy, Environment and Climate Change, Teresa Ribera, some changes could be made in favor of renewable energies and the energy transition.
What are our neighboring countries doing?
Spain is the European country that mostly hinders the development of renewable energy at the particular level of self-consumers. While in other countries the growth of facilities is increasing every year, in addition to having different ways to compensate the energy injected to the network, for example:
– In Germany and the UK self-consumers get paid for each kWh injected to the grid, without having to pay extra costs for production or connection to the grid.
– USA, Portugal, Brazil and Australia work with Net Balancing schemes, that means, for each kWh injected to the grid they have the right to consume this kWh at any point they need it. In other words, the network acts as a big battery for prosumers that can save their excess generated solar electricity for the night.
– Italy and Chile discount from the invoice a quantity of money according to the kWh injected to the grid.

This is the end of Part 2. In the next parts we will look into the two types of self-consumers - residential and industrial - and we will quantify the costs of installation and legislation, as well as the payback periods for each one.

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