Circular 2/2025 of the CNMC and its implications for renewable gas production plants

The purpose of the Circular is to regulate the procedure and conditions for third-party access and connection to transport and distribution facilities in the gas system, including within its scope facilities subject to third-party access under Article 60 of the Law on the Sector of Hydrocarbons ("LSH") [6]. Additionally, the Circular includes owners of production plants of other gases (such as renewable gases) as new subjects with access and connection rights to the gas system facilities (Article 4 of the Circular). 

The main novelties introduced by the Circular regarding the connection of these plants are: 

• Connection request: The connection request for the respective production plant must be submitted (i) through the online platforms for requests and procurement managed by the grid operators; and (ii) with the minimum content specified in Article 31 of the Circular (including, among other data, the identification of the renewable gas production plant or the requested connection capacity (in kWh/d)). 
• Grounds for denial of connection: Connection may only be denied in the following cases: (i) lack of available capacity; (ii) non-payment of agreed amounts in contracts for the construction of connection facilities related to the renewable gas production plant; (iii) insufficient deposited economic guarantees; or (iv) if the connection facilities related to the production plant could cause technical harm or jeopardise the operation of the gas infrastructures (Article 5.3).
• Connection procurement: Once the connection request is accepted by the grid operator, owners of renewable gas production plants may procure their connection via the platforms for connection requests and procurement (Article 14). For connection purposes, the Circular differentiates between gases that do not require mixing (such as biomethane) and those that do (such as hydrogen):
  • Gases not requiring mixing: Acceptance of the connection request will depend on the approval of the system's technical manager (i.e., Enagás GTS, S.A.U.), which must analyse the compatibility of the resulting gas flow composition with the system's and users' facilities. In particular, as to whether there is a possibility of gas inflow to interconnected upstream grids or reverse flow. Connection requests for this type of gas will follow a chronological priority criterion.
  • Gases requiring mixing: Acceptance of the connection request, also subject to the system's technical manager's approval, will be decided annually through a competitive procedure to be developed by the CNMC. Such procedure will include three phases: (i) determination and publication by the system's technical manager of the conditional connection capacity [7] available by areas for the next five years, as well as applicable conditions and the probability of their application; (ii) submission of requests by promoters, which will be ranked based on project maturity [8]; and (iii) communication by grid operators of the acceptance or denial of the connection request and, if applicable, the conditional connection capacity. 

To provide approval, regardless of the type of gas, the system's technical manager must analyse the flow rate and quality of the gas circulating in the gas system, its proper functioning and safety.

• Connection contracts: Connection contracts for renewable gas production plants will be signed between the owners of these plants and the owners of the grid where the connection will take place (Article 15 of the Circular). These contracts must include the minimum content specified in Article 17 of the Circular, including: (i) the contract reference number (necessary for subsequent access requests); (ii) identification of the parties and production facility [9]; (iii) the assigned conditional connection capacity (in kWh/d); and (iv) the technical conditions that could cause a reduction in conditional capacity and the probability of their application. The CNMC may establish a standard connection contract model.

The Circular introduces the following new aspects regarding access for these plants:

• Service for access from renewable gas production plants: Article 9.1.i) of the Circular defines the new individual service of "entry to the Virtual Balancing Point from production plants of other gases", allowing gas transfer from a production plant's connection point to the Virtual Balancing Point ("VBP") [10]. Access capacity for this service will be offered through individual conditional capacity products (Article 11.2 of the Circular).
• Access request: The access request must (i) be submitted through the system's technical manager's online platform for requests and procurement; and (ii) comply with the minimum content specified in Article 32.3.c) of the Circular (including, among other data, the start and end date of the product – allowing for indefinite product procurement – or the connection contract reference number).
• Grounds for denial of access: Article 5.1 of the Circular specifies the only reasons for denying an access request: (i) lack of available capacity during the requested contractual period; (ii) non-payment of fees, charges, or imbalance surcharges; (iii) insufficient deposited economic guarantees; (iv) apparent inability to operate in the gas system, which has resulted or could result in significant technical or economic harm to the gas system; or (v) in the event of congestion in necessary infrastructures.
• Procurement of access to the VBP: Independently, plant owners must procure the entry service to the VBP through the online platform for requests and procurement, subject to the system's technical manager validating that sufficient economic guarantees have been provided. Article 19.3 of the Circular clarifies that (i) commercial transactions for gas ownership can occur at the VBP regardless of the entry or exit point; and (ii) all gas delivered to the VBP is freely exchangeable. Article 25 (i) specifies that the CNMC will approve a standardised access contract model via resolution, and (ii) includes its minimum content. Note that non-payment of fees and charges by the user will result in partial or total suspension of access to the gas system facilities.

Article 28 of the Circular introduces the fundamental principle that procuring the connection grants the right to procure access to the grid, up to the maximum value of the conditional capacity specified in the connection contract [11]. When it becomes necessary to reduce assigned conditional capacity, the available capacity at the grid will be distributed based on the chronological order of accepted connection requests. Enagás GTS, S.A.U. must develop a procedure to manage such reductions.

For calculating conditional capacity for connection, factors such as the following must be considered: (i) the quality ranges of the gas produced by the plant; (ii) the quality of the gas circulating in the grid; (iii) the connection capacity in use and its degree of utilisation; or (iv) the capacity calculation criteria established in the CNMC Resolution of 10 November 2022 [12] (Article 39 of the Circular).

The Circular also introduces the following relevant provisions:

• Transparency and publicity regarding connection: Depending on the type of gas, the duty of transparency and publicity must be fulfilled by: (i) the system's technical manager, in the case of gases requiring mixing, who must publish available connection capacity by areas; or, alternatively, (ii) transport and distribution grid owners, in the case of gases not requiring mixing, who must publish information on available connection capacity by sections of the corresponding infrastructure.
• Secondary market for access capacity: Entry capacity to the VBP is excluded from the secondary market (Article 41 of the Circular).
• System's technical management regulations: Article 42 of the Circular establishes that the CNMC will develop the system's technical management regulations within its competence.
• Supervision: Article 43 of the Circular states that the CNMC will be responsible for (i) supervising the correct application and implementation of the Circular; and (ii) resolving any conflicts arising from it.

Article 50 of the Circular outlines measures to prevent capacity hoarding and alleviate congestion in the connection and access of renewable gas production plants. These measures can be summarised as follows:

• The plant's relinquishing of its assigned conditional capacity, provided that the costs incurred or firmly committed by the grid operator related to the connection up to the time of the relinquishing notification have been paid.
• Loss of the right to use the connection in cases of unused assigned conditional capacity [13] for a period to be determined by the CNMC [14].
• Release of procured conditional connection capacity in cases of underutilisation, except for technical unavailability of the grid. The CNMC will develop the detailed calculation and application procedure for this measure.

Article 57 of the Circular regulates the economic guarantees to be deposited for the connection of renewable gas production plants:

• Applicants for connection of these plants may freely agree with grid owners on the terms of connection payments and related economic guarantees (which must be included in the connection contract), although the CNMC may establish minimum requirements.
• In the absence of an agreement, the economic guarantees (i) will amount to the accepted connection budget not previously paid by the plant owner; and (ii) must be provided within a maximum of 30 business days from the grid owner's notification that it obtained the administrative authorisation for the construction of the connection.
• The economic guarantees will be progressively returned to the owner of the plant, in accordance with the payment schedule outlined in the connection contract or after relinquishing the connection contract, once the costs incurred by the grid operator have been paid.

The Circular provides a necessary regulatory framework to ensure legal certainty in the connection and access of renewable gas production plants to the gas system. However, some key aspects remain to be developed, which are crucial for producers of these gases. Their regulation will allow a full assessment of the Circular's implications for these plants.

These aspects include: (i) the approval by the CNMC of the competitive procedure applicable to the connection procurement of production plants of gases requiring mixing; (ii) the approval by the CNMC of the standardised access contract for entry to the VBP, as well as the potential approval by the CNMC of a standardised connection contract for renewable gas production plants; (iii) the procedure for reducing conditional capacity, to be developed by the system's technical manager; (iv) the development of the system's technical management regulations by the CNMC; (v) the determination of the timeframe for considering unused conditional capacity, also by the CNMC; (vi) the detailed procedure for calculating and applying the release of conditional capacity due to underutilisation, to be approved by the CNMC; and (vii) the possible establishment by the CNMC of minimum requirements for economic guarantees to be deposited for the connection of these plants.