Energy law as a key to achieve the transition goals
In all facets of life, it is always useful to take stock in order to analyse what has been achieved so far; otherwise, we risk losing perspective.
The purpose of this article, then, is to provide a holistic view of what has happened during 2022 in terms of Energy regulation and to point out the main challenges that 2023 will bring.
Just when it seemed like Covid-19 was fading into memory, Europe was faced with a significant increase in the price of electricity supply in the second half of 2021. Something which, unfortunately, coincided months later with Russia’s military invasion of Ukraine.
This is clearly a geopolitical context that has a high global impact on the energy sector and, consequently, on both energy policy and regulation.
In the context of European regulation, the most important package of legislation negotiated during 2022 has officially been called “REPowerEU”. It is a plan that combines instruments of soft law and hard law, with the most notable element of “REPowerEU” soft law being the Communication of the European Commission on 18 May 2022, announcing its objectives and key aspects. In terms of its hard law elements, particularly important are both Council Regulation (EU) 2022/1854 of 6 October 2022, on an emergency intervention to address high energy prices, and Council Regulation (EU) 2022/2577 of 22 December 2022 laying down a framework to accelerate the deployment of renewable energy.
In Spain, the approval of the following Royal Decree-Laws is particularly worthy of note because of their high impact on the regulation of the electricity sector: Law 6/2022, of 29 March, adopting measures in the context of Russia’s invasion of Ukraine; Law 10/2022, of 13 May, establishing a mechanism for adjustment of production costs to reduce the price of electricity in the wholesale market; Law 14/2022, of 1 August, approving an emergency plan for energy saving; Law 18/2022, of 18 October, relating to the protection of energy consumers and the reduction of natural gas consumption in the application of the “+Seguridad para tu energía (+SE)” (+Security for your energy) plan; and Law 20/2022, of 27 December, approving a broad range of energy-related measures, some of them relating to the authorization of electricity production facilities.
Other Royal Decree-Laws have also been approved that extend the validity of some of the previously adopted energy measures, principally of a tax nature.
Most of the European and domestic legal instruments referred to above respond to facts that the legislator has deemed merit a legal reaction in the form of extraordinary Law. Indeed, the European legislative acts are Council Regulations adopted under Article 122(1) of the Treaty on the Functioning of the European Union (TFEU) and the rules adopted in Spain are Royal Decree-Laws enacted on the basis of Article 86 of the Spanish Constitution. It is possible, however, that the legislator has not always exercised due rigour in complying with the enabling budgets established in the aforementioned articles. Consequently, it cannot be ruled out that the energy crisis Law ends up causing the Energy Law crisis.
“As far as the regulatory challenges facing us in 2023 are concerned, the one that stands out above the rest is the reform of the internal market for electricity.”
As far as the regulatory challenges facing us in 2023 are concerned, the one that stands out above the rest is the reform of the internal market for electricity. In this regard, the European Commission opened a public information period, from 23 January to 13 February 2023, to submit comments on the reform of the design of the European Union’s electricity market. However, there are other legal issues that will also play an interesting role in 2023, such as green taxonomy and state aid.
In this regard, on 10 January 2023, the Spanish government published a press release with the basic outlines of its proposal for reform of the domestic electricity market, which it sent to the European Commission.
There is consensus on the need to redesign the domestic electricity market, but the key issue is how it should be reformed. In this regard, it is vital for national governments to base their reform proposals on technological neutrality; of course, it must be understood that, in legal terms, any use of this principle for a do-nothing policy would be invalid -an attitude that would hinder both decarbonisation and decentralisation of the energy sector.
“The proposals must also consider innovations such as the local electricity markets in the framework of the generation distributed and not just utility-scale projects. If the two options are not combined wisely, we will be missing out on a great opportunity for industrial and digital transformation.”
The proposals must also consider innovations such as the local electricity markets in the framework of the generation distributed and not just utility-scale projects. If the two options are not combined wisely, we will be missing out on a great opportunity for industrial and digital transformation.
This reasoning is strengthened by the content of the reasoned opinion sent by the European Commission to Spain on 26 January 2023, urging the full transposition of the Directive (EU) 2018/2001 on renewable energy sources into national law. The Spanish government now has two months to comply with the transposition obligation and notify the Commission; if it does not do so, the Commission may decide to take the matter to the Court of Justice of the European Union (CJEU) for failure to fulfil the obligation.
Given the above, it will be essential to guide the energy transition in accordance with the principles of good regulation and to consider the medium and long-term implications in decision-making, despite the seriousness of the current context.
About the authors
Vicente Lopez-Ibor Mayor. PhD in Law. Harvard Business School and IESE Graduate. President of the European Federation of Energy Law (EFELA). President of the Spanish Energy Law Association (AEDEN). Former Commissioner of the National Energy Commission of Spain (CNE – current CNMC). President of EJI López-Ibor Mayor Abogados. Attorney. Professor of Energy Law.
Ignacio Zamora Santa Brígida. PhD in Law. Member of the Spanish Energy Law Association (AEDEN). Senior Associate at EJI López-Ibor Mayor Abogados. Attorney. Lecturer in Energy Law.
About EJI López-Ibor Mayor Abogados
Founded in Madrid in 2005 by Dr. Vicente López-Ibor Mayor. EJI López-Ibor Mayor Abogados is a leading national and international law firm in comprehensive advice for clients and companies in Energy Law, the electricity sector and the renewable energy, gas and oil sectors, law European community, administrative, economic, commercial and corporate. Get more information on Energy Law at the Spanish Energy Association and at the European Federation of Energy, where EJI López-Ibor Mayor Abogados has an active presence.