Spain creates a capacity market where storage can bid for 15-year contracts

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Spain has created a capacity market for its peninsular electricity system, with the reference regulation published in mid-September 2026. It sets up recurring auctions that pay firm and flexible power for being available when the system operator calls on it. Storage and new renewables sit inside the mechanism rather than outside it, which for operators tracking the Spanish build-out is the piece that had been missing. The framework existed in the enabling legislation. What has now landed is the order that creates the market and fixes how the auctions work.

The service is awarded through technology-neutral auctions that clear on firm power in megawatts and on price in euros per megawatt per year, under a pay-as-bid design where each winner is paid its own bid. Generation plants that take part cannot emit more than 550 grams of CO2 per kilowatt-hour, have to meet the firmness and flexibility requirements each auction sets and receive no other regulated payment for the same capacity. Where the auctions take in new investment rather than existing plant, only renewables, storage or demand can compete, so the mechanism steers new capacity away from fossil generation.

For storage the effect is direct. A battery project can bid for an availability payment that runs as long as 15 years for a new investment, against one year for existing installations and between one and 10 years for new demand. Firm power is scaled by each technology's firmness coefficient, so a battery contributes more firm capacity per megawatt than a variable renewable does. Its firm contribution is also bounded by its grid access capacity. A new solar or wind plant can still take part, with a firm-power contribution set by its own firmness coefficient rather than its nameplate.

The regulation runs three auction types rather than one. A main auction, held annually where a firmness need is identified from the system's forward adequacy analysis, is where existing plant and new renewable, storage or demand projects compete, with the service starting on a date the call sets and running out to the durations above. An annual adjustment auction is open only to plant already in operation and covers a single 12-month period, meant for shorter-term gaps. A transitional auction bridges the years until the main-auction service begins. Reading any one of these as the whole market would understate how the pieces fit. The volume and frequency of each depend on the firm-power needs identified in the system's five-year adequacy outlook.

The cost falls on electricity supply and on consumers buying directly in the market, charged through unit prices that weight the hours when the system is most stressed. Those hours are capped at a tenth of the annual total, so the design also nudges consumption toward calmer periods and flattens the load curve. Allocated rights and obligations can change hands on a secondary market. The system operator and the national regulator verify that the contracted capacity is genuinely available.

For an operator the practical read is that Spain now offers a technology-neutral, long-dated capacity payment that storage and new renewables can bid into, alongside merchant revenue and any PPA a project signs. What that payment is worth turns on the firm power a project can offer, the price the auctions clear and how it stacks against capture prices across the Spanish market. That balance is the kind of modelling SEMT is built for. You can explore it at https://synertics.io/signup/ or reach us at info@synertics.io to talk it through for your portfolio.