Spain's competition authority puts brakes on data centre decree, calling for more flexibility with renewable energy requirements

The regulator has questioned a large proportion of the government's requirements and is calling for a reduction in renewable energy obligations, an extension of deadlines and a review of surcharges of up to 500 per cent. Begoña Villacís, director of SpainDC (the data centre trade association), believes that "it would be surprising if the government were to ignore the CNMC".

The report reveals planned investments totalling 66.9 billion euros, alongside signs of stagnation. "The phones have stopped ringing ," industry sources said, declaring a sharp slowdown in discussions with potential investors since the draft was published.

The CNMC also warns of the risk to projects that already hold electricity permits: the decree provides for these permits to lapse if the facilities have not yet been connected to the grid and do not meet the new conditions within six months.

Villacís said that the report supports the employers' association's claims. "It confirms everything we say. Nothing has been left out," she stated. According to her, the sector already complies with even the regulator's strictest recommendations, particularly regarding water consumption.

The report comes as Moncloa steps up the pace to pass the decree between late October and early November, before the general election on 29 November. The government is preparing amendments to the text, but the promoters doubt there will be time to incorporate them.

The government has more than 600 submissions on the table. It must examine the objections of the CNMC and still has to go through a review process before resubmitting the regulation to cabinet.

Villacís believes the regulation might not be ready by October: even if the government requests urgent processing, which could reduce the timeframe for the ruling to less than 15 days, the advisory body could still reject it.

This rush is also driven by Spain's commitments to secure the final tranche of European funds. Industry sources believe the government may be willing to negotiate, but fear that it will maintain the time-of-use mechanism and the requirement for 80 per cent additional renewables. They believe that retaining both conditions would deal a decisive blow to the projects.

The biggest challenge lies in the energy sector. The decree requires 80 per cent of data centres' energy demand to be met by new renewable energy generation and mandates that 80 per cent of the electricity consumed and produced must be matched on an hourly basis. The CNMC warns that these conditions could drive up costs and force unnecessary investment in wind farms and batteries. It has pointed out that Spain recorded almost 600 hours of negative prices during daylight hours in the first half of 2026.

The CNMC is proposing to reduce the initial percentage or to phase in compliance until 2030. It also proposes that hourly correlation requirements be deemed to be met when electricity costs 20 euros per megawatt-hour or less, emissions are low or there is a surplus of renewable energy. It also calls for independent storage, demand management and the expansion of existing wind farms to be recognised. Its argument is that it makes no sense to require new generation capacity when the system already has surplus electricity.

The deadlines open up another front. The bill gives data centres that have been granted access and connection permits but have not yet been connected six months to comply with the new requirements. Otherwise, they will lose those rights. The CNMC is calling for a transitional regime to protect investments already made and avoid penalising delays beyond the developers' control.

It also questions the maximum age limit of 18 months for renewable energy installations linked to data centres. It proposes extending this limit, using the 36-month period set out in European legislation on renewable fuels as a benchmark and considers the 20 days allowed for the decree to come into force to be insufficient.

The regulator is also unsure about the penalties. The government is proposing surcharges of up to 500 per cent on tolls and electricity charges for certain breaches. The CNMC rejects this approach and calls for penalties to be linked to the cost they generate for the system, with future capacity mechanisms serving as a possible benchmark.

The regulator also wishes to make power purchase agreements (PPAs) for renewable electricity more flexible. The decree requires agreements to be for a minimum of ten years and to be formalised in a public deed before applying for grid access.

The CNMC warns that these conditions tie developers' hands and make switching suppliers more costly. It calls for joint contracts to be permitted, for renewable plants to be replaced with equivalent ones and for official guarantees of origin to be utilised.

The report also questions the cooling requirements. The government has set both an energy efficiency indicator (PUE) of 1.15 and a water usage efficiency indicator (WUE) of 0.1. The CNMC warns that these two targets may conflict: saving water may require more electricity and vice versa.

Given the water scarcity in Spain, it proposes prioritising water saving, distinguishing between potable and reclaimed water and relaxing the energy parameters during the commissioning of facilities.

The CNMC also questions the division of powers. It rejects the idea that network operators should assess sustainability or digital sovereignty requirements and points out that it is responsible for regulating the conditions of access and connection, including the grounds for the revocation of licences. It also calls for the protection of operators' sensitive commercial information and for the refund of capacity reservation payments when a developer relinquishes their licences without incurring a penalty.

The dispute comes amid a flood of connection applications. According to the CNMC, data centres account for some 12 GW of approved permits, a further 27 GW pending approval and more than 32 GW of rejected applications. The regulator shares the government's concern about the impact of this demand on the grid, but insists that excessive investment must be avoided and that the specific upgrades required by these projects should not end up being paid for by all consumers.

The government is facing the final stretch of the decree's passage, with the regulator calling for fundamental changes, three projects threatening to pull out and a sector that questions both the requirements and the rush to approve them.

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