24 Sep Data Centre Regulation in Spain: The New Draft Rules

Behind every internet search, every streamed video and every query put to an artificial intelligence tool, there is an industrial building packed with servers running around the clock. These are data centres, and their expansion in Spain has been so rapid that it has put the electricity grid itself under strain: the connection requests submitted so far are three times what the Government estimated would be needed by 2030.

The problem is not just one of volume. The grid operates with limited physical capacity, and if data centres absorb most of that capacity, fewer resources remain available for industry as it electrifies, for transport or for other sectors. And because these facilities draw power constantly, day and night, during hours without sun or wind the system turns to gas-fired power stations to meet demand, which ultimately feeds through into electricity prices for consumers as a whole.

The regulatory response: three conditions for connection

To bring order to this growth, the Spanish Government has drawn up a draft Royal Decree which, for the first time, introduces entry requirements for access to the electricity grid. Available capacity is no longer enough; a data centre will have to demonstrate three things simultaneously:

The first concerns the origin of the energy. Connecting to the general grid is not sufficient: the operator must show that 80% of its consumption is covered by solar or wind installations built specifically for that project (existing plants do not count), and that the output of that energy matches, hour by hour, the time at which it is consumed.

The second condition relates to technical efficiency: the rules set very strict thresholds on the proportion of electricity used to cool the equipment —as opposed to the electricity that actually powers the servers— and on the water used for that cooling. According to the proposed standards, these would be the most demanding levels in Europe, particularly as regards water.

The third requires the information handled by these centres to remain under European jurisdiction: the operating company must be established in the EU, the data may not leave EU territory and the operator must be able to refuse any access request from a foreign authority that does not respect the EU legal framework. Spanish public bodies, moreover, are barred from hosting their systems in centres that cannot guarantee that the data stays within the EU.

What are the consequences of non-compliance?

Non-compliance does not simply lead to an administrative penalty, but to a direct increase in the cost of grid access of up to 500% where the operator’s own renewable coverage is lowest. And if serious non-compliance continues for five years, the operator permanently loses its right to connect.

The most sensitive point, however, is that these rules are not confined to future projects. Applicants whose requests are still pending will have just three months to demonstrate compliance before facing possible refusal. Those who already hold a permit but have not yet connected will have six months, after which they lose both the permit and the guarantee they have lodged. The rules do provide an exit route: during those same six months, a project may be voluntarily abandoned without the guarantee being called.

The impact on Aragon

No region illustrates what is at stake better than Aragon, which is home to data centre projects with a combined capacity of close to 2,500 MW (one of the highest figures in Spain). The regional government itself has put the investment that could be jeopardised at more than €54 billion if the text is approved as currently drafted, and has formally requested a full review before it is adopted.

The arguments put forward, also backed by the Aragon Energy Cluster (Clúster Aragonés de la Energía) through almost seventy proposed amendments, operate on several fronts. On the one hand, they question whether a regulation can impose new conditions on permits already granted and on projects at an advanced stage, thereby altering the landscape in which multi-million investment decisions were taken and opening the door to claims against the authorities. On the other, they ask whether such restrictions on grid access should be laid down by statute rather than by decree. And, at a more strategic level, they warn that a framework stricter than elsewhere in the European Union could push investors towards countries with less restrictive rules, rather than strengthening Spain’s position as a destination for digital infrastructure.

They also call for the explanatory report accompanying the draft to include a thorough study of its economic and territorial impact, something which, according to those who have submitted objections, has not been addressed with the necessary rigour given the scale of the figures involved.

Conclusions

Clearly, the new regulation turns access to the electricity grid into an entry filter: only data centres able to supply their own renewable energy, minimise their water consumption and guarantee European control over the data they handle will remain in the market. This filter is likely to exclude smaller or speculative projects, while the big tech companies (with the capacity to sign ten-year renewable power purchase agreements) will adapt without difficulty. It is paradoxical that a measure designed, among other aims, to reduce dependence on those very same tech giants should end up reinforcing their dominant position.

For Aragon, with a very significant share of its digital investment pipeline hanging on this process, the final outcome of the submissions made —and the leeway granted to projects already under way— will be decisive for the future of the sector in the region.

From a strictly legal standpoint

Applying the requirements set out in the new draft, particularly to permits already granted and to projects at an advanced stage of processing, is, at the very least, open to question under Spanish law from the perspective of legal certainty and legitimate expectations.

Added to this is the uncertainty created by a framework more demanding than those in force in other Member States, with the resulting risk that, as noted above, investment may shift to less restrictive regulatory environments, at a time when the rules themselves, paradoxically, seek to strengthen Europe’s position vis-à-vis third countries.

In short, this is a draft with legitimate objectives, but its current design, especially as regards the transitional regime and the proportionality of the consequences of non-compliance, raises some initial doubts as to whether it can workably be applied. Nevertheless, it remains to be seen how matters develop and what amendments are finally incorporated into the text before it is definitively adopted.