Spain launches electricity capacity market and increases grid investment

Spain is implementing a new capacity market for its peninsular electricity system to enhance grid resilience and security of supply. The Ministry for the Ecological Transition and the Demographic Challenge (MITECO) announced the creation of this market, which will be managed through technology-neutral auctions. The mechanism will remunerate generation, battery storage, and demand-side resources for providing firm capacity and flexibility to the grid.

Participants in the auctions can be existing installations or new projects, with new investments specifically targeting non-fossil technologies. To qualify, generation plants must adhere to an emissions limit of 550 grams of CO2 per kWh. The market uses a ‘pay-as-bid’ system, where winners receive the exact price they offer.

In conjunction with this new market, the Spanish government has increased its planned investment in the electricity transmission grid to over €17 billion through 2030, a significant rise from previous estimates. This expansion aims to meet the growing demand from industrial consumers, such as data centers, and to support the integration of renewable energy and storage systems. Additionally, the government is addressing the energy needs of large consumers through proposed regulations to ensure that increased electricity demand is met with corresponding renewable energy capacity.