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Spain Introduces Capacity Market Mechanism to Secure Grid Stability and Drive Energy Transition

Writer's picture: Energy BoxEnergy Box

The Minister for Ecological Transition, Sara Aagesen. PHOTO: Eduardo Parra - Europa Press


The Spanish government has launched a public consultation on a new capacity market mechanism designed to ensure electricity supply security and promote investment in energy storage, demand response, and other flexible solutions. This initiative aims to incorporate technologies that provide stability to the grid, contributing to Spain's energy transition.


Under the proposed system, generation and storage facilities, along with demand response (consumers and aggregators), will be compensated for providing stability—either by being available to inject power into the grid or by reducing consumption as requested by the system operator, Red Eléctrica.


Auction System

The capacity services will be allocated through three types of auctions:


  • Main Auction: Open to existing and new renewable, storage, or demand projects. Auctions will be held annually, offering service periods from 1 year for existing projects to up to 15 years for new investments.

  • Annual Adjustment Auction: Only existing facilities can participate, offering service for 12 months. This auction is designed for short-term adjustments to meet temporary needs.

  • Transitional Auction: Aimed at ensuring grid stability until the main auction services begin, held annually with one-year service periods.


Secondary Market

A secondary market will be created to improve liquidity, enabling the transfer of rights and obligations awarded in the auctions, either through facility ownership changes or transfers to other eligible facilities.


Financing & Regulations

Costs will be borne by retailers and direct consumers, with differentiated pricing based on tariff segments and system stress periods. The Ministry has worked closely with the EU to ensure compliance with European state aid rules and internal market regulations, following the reform of the European electricity market approved during Spain's EU Presidency in December.


Capacity mechanisms are seen as an essential tool to integrate flexible technologies like energy storage and demand response, ensuring long-term supply security while supporting Spain's transition to a sustainable energy model.


The public consultation period is open for six weeks until January 29, 2025. After that, the ministerial order will be approved, and the system operator will issue its implementation guidelines.

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