The large cogeneration sector, which powers electricity by using heat produced in factories in fields such as ceramics, paper, and food processing, faced a potential full shutdown on July 1 if the government failed to intervene to stop the ongoing activity. Failure to act could trigger substantial losses across the industry.
The government implemented an aggressive measure, deploying an extraordinary package that reshaped forecast methods for electricity pricing and the cost of gas used to determine payments to renewable energy sources and cogeneration. This reform is expected to have a pronounced impact on the cogeneration segment.
As part of the royal decree, the pricing framework for these facilities covering 2023–2025 was updated to improve compensation. An additional 180 million euros in regulated revenue would flow to year‑round renewable and cogeneration facilities, with 20 million extra earmarked specifically for cogeneration plants in the first half of the year.
Details about the new pricing and the regulation’s specifics were anticipated to be clarified soon. The cogeneration sector is cautiously optimistic that the approved legal changes will be enacted, reducing the risk of factory closures in the second half of the year and stabilizing the income and costs faced by power plants.
Application deadline: July 1
In Spain there are about 600 cogeneration plants. These factories must procure gas for industrial processes and generate electricity through the Recore system, receiving a guaranteed fee by law, similar to the prior premium paid to certain renewable energy sources. The pricing review is conducted every six months.
Last December, the Ministry for Ecological Transition, led by Vice President Teresa Ribera, proposed updating the fee for the first term of the year, but the proposal was not approved, leaving the year’s fee unsettled. If the adjustment does not arrive on time, large cogeneration groups warn that a common plant disruption could occur starting July 1, given the current wage framework would force facilities to operate at a loss.
The government is pursuing a comprehensive reform of the cogeneration compensation model, though it has not yet been ratified and will be taken up by the next administration. The ministry, under Ribera, proposed a new methodology for calculating industry wages, which would have meant an improvement of about 33% from current levels, translating to roughly 1.5 billion euros per year. For now, it remains unconfirmed, and the administrator has played a wait‑and‑see role while an extraordinary adjustment to the existing parameters is kept in place.
Lower the estimated electricity and gas price
Current wage values, as set by the government, are based on high projections for the electricity market (208 euros per megawatt hour, MWh) and for gas (140 euros per MWh), well above the prevailing market prices of about 90–100 euros for electricity and around 30 euros for gas, which creates a situation where guaranteed payments are challenged in practice.
If the executive does not update these parameters for the second half of the year or does not implement the new methodology, the cogeneration fee could drop to zero and plants might be forced to halt operations from July 1. The new estimate reduces to 109 euros per MWh for electricity and 40 euros for gas.
Cogeneration utilities now have a choice: they can rely on the Recore fee or take advantage of compensation enabled by the Iberian exemption, which caps the price of gas used in electricity production to lower electricity costs and compensate power plants for actual gas costs. However, that exemption has been paused for months due to low gas prices.
Notes: The government’s actions reflect a broader shift toward reforming how cogeneration is remunerated, aiming to guard industry viability while balancing regulatory costs. Sources include the Ministry for Ecological Transition and official government communications, with attribution to the relevant public authorities that oversee energy pricing and industrial support programs.