This major sector relies on cogeneration, using the heat from industrial processes to generate electricity in fields such as food, ceramics, and paper. If the government does not act first, activity could halt within a month. The industry fears that political progress may slow or derail the promised legal reforms designed to prevent an imminent collapse.
Around 600 cogeneration facilities currently operate in the Spanish market. They purchase gas and generate electricity for their industrial processes, with wages secured by law and tracked through a recording system similar to what regulated renewable energy sources receive as premiums. The amounts are reviewed every six months. Last December, the Ministry for Ecological Transition proposed updating this fee for the first term of the year, but approval has not been granted, and consideration for the second term remains pending.
If the second-term update does not arrive on time, major cogeneration groups warn that plants could shut down broadly starting on July 1, since the current wage levels would push many plants to operate at a loss. This situation has been reported by industry outlets including Prensa Ibérica and El Periódico de España.
New Methodology
In practice, the government is pursuing a comprehensive reform of the cogeneration compensation model for the second half of the year. Under Vice President Teresa Ribera, the Ministry has issued a proposal for a new method of calculating sector remuneration, signaling a potential 33% uplift from current levels. If implemented, this could bring approximately 1.5 billion euros per year to companies, though the proposal has not yet been confirmed.
The call for a long-overdue new methodology has been a common ask from cogeneration operators. Yet, given the complexity of the current environment, many companies remain content with the government’s current approval trajectory for wage values in both the first and second semesters, even as the new methodology faces months of delay. A new manager—appointed after the 23J elections—is now in office, adding to the ongoing negotiations.
At present, the charging values in force are determined by the government based on an electricity market price estimate that has been unusually high, around 208 euros per megawatt hour (MWh), far above current market prices of roughly 80 to 90 euros. This gap leaves little room for guaranteed fees. If the manager does not update these parameters for the second half of the year or proceed with a comprehensive reform using the new methodology, the cogeneration fee could drop to zero, potentially forcing many power plants to halt from July 1 as warned by industry groups.
Operators currently have a choice between relying on the Recore fee and the compensation offered through the Iberian exemption, which caps gas costs used in electricity generation to ease consumer prices. The exemption has been paused for three months due to low gas prices.
Legal Battle in the Supreme Court
Almost a hundred cogeneration facilities have filed a series of contentious-administrative appeals with the Supreme Court seeking compensation for losses incurred under the regulatory framework introduced last year by the Ministry of Ecological Transformation. Companies seek substantial compensation for losses suffered during the energy crisis, tied to wages set by law by the government, which has led to the shutdown of many factories in both the previous year and the current one.
In total, about two-thirds of cogeneration plants halted operations last year as electricity generation produced losses, despite the sector’s regulated status. This year already, electricity output has fallen by more than half as financial accounts remain unsettled and costs press downward, prompting continued concern across the industry.