The Net Zero Industry Act (NZIA) of the European Union aims to strengthen the manufacturing industry for clean technologies within the continent. Among its provisions, it introduces the possibility of including non-economic criteria in renewable auctions.

According to Alejandro Labanda, Director of Ecological Transition at beBartlet, this change stems from the reflection on “to what extent an allocation based exclusively on price is affecting the European renewable energy industry.”

Now, the regulation seeks to define the criteria and the weight they will carry in the evaluation of projects.

In an interview with Strategic Energy Europe, the consultant explains that “there is an ongoing discussion about which components should be considered strategic and how mechanisms can be structured to reward their use.”

These changes pave the way for multiple auction models. Some governments could assign a fixed percentage of points to projects using European-made supplies, while others could segment the auctioned capacity into categories with and without non-economic criteria.

Labanda identifies several ways in which countries could design their auctions:

• Additional scoring: awarding extra points to projects with a higher percentage of EU-manufactured components.
• Differentiated quotas: dividing into blocks, allowing a portion to be assigned exclusively to projects with local content.
• Minimum requirements: establishing that certain essential components must be manufactured in the EU to be eligible.

“There is no single auction model,” Labanda emphasizes, adding that “each country can adapt the criteria according to its needs and industrial capacity.”

Currently, Spain already has a legal framework allowing up to 30% of non-economic criteria, as established by Royal Decree 8/2023. However, this tool has never been used in any call for tenders.

The country has not held new renewable auctions since November 2022, failing to meet the scheduled annual tenders.

In that last one, 3,300 MW of wind and photovoltaic capacity were offered, but only 45.5 MW of wind power were awarded. This result exposed a competitiveness issue, as the prices offered fell below market expectations.

In this regard, a new design is expected to restore its role in mitigating market volatility and speculation.

According to Labanda, “Spain has several alternatives on the table to restructure auctions without compromising competitiveness.” Some options include:

• Creating a specific quota for projects with European manufacturing, without affecting the competitiveness of other participants, “which could be 10%, 40%, or 50%, depending on the Government’s interest.”
• Adjusting reference prices to make them more attractive to developers.
• Evaluating whether non-economic criteria can be applied only to a part of the auction, without affecting the total allocation.

“If the Government decides to incorporate industrial criteria, the most logical approach would be to do so gradually,” Labanda suggests, adding that “they could start with a limited quota and assess its impact before extending it to the entire auction.”