Energy and biomass producers face new restrictions on financial support

Royal Decree 926/2026, published in the BOE, establishes a new regulatory framework for biofuels, bioliquids, and biomass fuels used for energy production in Spain. This regulation, introduced by the Government, implements key aspects of the European Union's 'Fit for 55' package, specifically transposing Directive (UE) 2023/2413, to ensure that biomass usage aligns with climate neutrality goals and the principle of efficient resource management.

What changes

The core of this regulation is the introduction of the cascade use principle. According to Article 1, biomass must be prioritized for use as a material (for industrial or manufacturing purposes) rather than being consumed for energy production whenever possible. This shift aims to maximize the value extracted from forest resources before they are burned for heat or power.

Furthermore, the decree introduces significant restrictions regarding public subsidies and financial incentives. Under Article 1, the following changes apply:

• Material Restrictions: Direct financial support for energy production is now restricted when using specific forest products, including sawmill logs, roundwood for industrial use, stumps, and roots. These materials are deemed lower in the hierarchy of use.
• Production Type Restrictions: The regulation limits the ability to obtain new financial support or to renew existing aid for biomass plants that function solely for electricity production. This measure is designed to promote more efficient bioenergy uses, such as combined heat and power (CHP) systems, rather than single-purpose electrical plants.

Context

This Royal Decree does not act in isolation; it is a critical component of Spain's transition toward climate neutrality by 2050, as established in Law 7/2021 on Climate Change and Energy Transition. It serves to align national law with the ambitious targets of the European Union, which seeks to increase the share of renewable energy in the total consumption to 42.5%.

To achieve this, the decree modifies several existing legal frameworks to ensure consistency across the energy and environmental sectors. Specifically, it modifies:

• Articles 2 to 8, the first additional provision, and final 9 of Royal Decree 376/2022, which regulates renewable energy incentives.
• The transitional provision 3.1.c), and adds Article 33 quater and transitional provisions 20 and 21 to Royal Decree 413/2014, regarding the regulatory regime for electricity sector activities.

By transposing Directive (UE) 2023/2413, the Spanish government is integrating the circular economy principles found in Law 7/2022 on waste and contaminated soils into the energy sector, ensuring that forest biomass management supports carbon sink maintenance and biodiversity conservation.

Who is affected and how

Energy Producers and Biomass Plants: This group faces the most direct impact. Companies operating plants that only produce electricity will find it increasingly difficult to access or renew public subsidies (art. 1). To maintain financial viability, these entities may need to transition toward multi-purpose energy production (heat and electricity) to comply with the new efficiency standards.

Forestry Companies and Wood Suppliers: Businesses involved in the extraction and sale of forest products must reassess their supply chains. Since financial support is restricted for energy produced from sawmill logs, roundwood, stumps, and roots (art. 1), the market value of these specific materials for energy purposes may decrease. Companies should pivot toward supplying materials that meet the higher-priority 'material use' criteria under the cascade principle.

Investors in Renewable Energy: The regulatory shift introduces a new layer of risk assessment for projects involving biomass. Investment models must now account for the 'cascade use' hierarchy, ensuring that the feedstock used is eligible for any intended public financial incentives.

What to do and when

This regulation enters into force on October 30, 2026. While the decree establishes the new legal framework, affected parties should take the following proactive steps:

• Audit Feedstock Eligibility: Companies must evaluate their current biomass sources. If your energy production relies on stumps, roots, or roundwood, you must prepare for the restriction of financial aid as per Article 1.
• Review Plant Functionality: Electricity-only producers should conduct a technical feasibility study to determine if converting to combined heat and power (CHP) models is necessary to secure future financial support or renewals.
• Update Procurement Strategies: Forestry suppliers should align their harvesting and sorting processes with the cascade use principle to ensure they provide high-value materials that remain eligible for industrial use.

Given the complexity of these changes and their impact on long-term financial planning, we recommend contacting the relevant area at BMC to evaluate your specific situation and ensure compliance with the new energy and environmental requirements.