Spain is introducing a capacity market for its peninsular electricity system, creating a new revenue mechanism for battery storage, generation and demand-side resources. The Ministry for the Ecological Transition and the Demographic Challenge announced the regulation on Sept. 16, with the ministerial order due to be published in the Official State Gazette. The mechanism is designed to ensure security of supply and support the integration of additional renewable generation, while the government separately increases planned electricity grid investment through 2030 to more than €17 billion.
The capacity market will remunerate generation, storage and demand resources for providing firm capacity and flexibility. Participants will receive payments for remaining available to inject electricity into the grid or reduce consumption when required by the system operator, Red Eléctrica. Capacity will be awarded through technology-neutral auctions based on firm capacity in MW and price in €/MW per year, using a pay-as-bid system. Generation projects must meet an emissions limit of 550 g of CO₂/kWh, as well as firmness and flexibility requirements specified for each auction, and cannot receive regulated remuneration. For new investments, only renewable energy, storage and demand projects will be eligible, directing new capacity toward non-fossil technologies.
The market will have three auction mechanisms. The main auction will be open to existing installations and new projects, with service periods of one year for existing installations, up to 15 years for new investments, and between one and 10 years for new demand. Main auctions will depend on five-year system coverage assessments identifying future firm-capacity requirements. An annual adjustment auction will be restricted to operational installations and provide capacity for 12-month periods to address short-term system requirements. A transitional auction will provide firm capacity until services awarded through the main auctions begin, with annual service periods. Consumers and electricity suppliers will fund the capacity market through differentiated unit charges based on tariff segments and time periods. Consumption during periods of greatest system stress, which will account for no more than 10% of the year, will bear a larger share of the cost. The mechanism will also include a secondary market for capacity rights and obligations awarded through the auctions, allowing them to be transferred between eligible installations. Red Eléctrica and the National Commission of Markets and Competition will oversee verification and compliance.
Alongside the capacity market, Spain is increasing planned investment in its electricity transmission network through 2030. The proposed 2030 transmission network plan initially included €13.6 billion of investment. Following the review of 2,566 submissions received during the public consultation, the planned investment has increased by more than 30% to more than €17 billion, or 144% above the investment level in the current plan. Demand accounted for 41% of the proposals received during the consultation, compared with 40% for generation and 19% for storage. The revised plan increases the number of transmission network positions intended to serve new demand on distribution networks by 52% to 300. Positions for direct consumption connected to the transmission network will increase by 12% to 162, while positions planned for rail corridors and port electrification will rise by 75% to 59. The plan also includes 193 substations, 17% more than in the initial proposal, and 6,706 km of new transmission lines, an 11% increase. The length of existing networks scheduled for reinforcement will rise by 6% to 8,164 km.
The capacity market and network plan address two separate requirements for Spain's power system. The grid investment provides additional network infrastructure, while the capacity mechanism creates a new payment stream for resources able to provide electricity or reduce demand when the system requires it. The Spanish government said the expanded network plan is intended to accommodate growing electricity demand from industry, buildings and transport while supporting additional renewable generation and storage. The longer contracts available to new projects in the main auction are intended to provide revenue visibility for investment and financing. However, the source does not specify auction volumes, expected capacity prices, or the total cost to consumers. It also does not detail how the 550 g CO₂/kWh emissions limit will interact with existing fossil generation beyond excluding new fossil investments. The evidence is based on a single secondary source, so independent confirmation of the ministerial order's final text and implementation timeline is not yet available.