September begins with the Spanish energy sector's attention focused on the capacity market. The mechanism received authorization from the European Commission on May 29th, with an estimated budget of €9 billion over ten years , but it is still awaiting approval of the ministerial order that will allow its incorporation into the national regulatory framework.
Its objective will be to ensure that the electrical system has firm power during periods of peak demand . Unlike the wholesale market, which remunerates the energy produced, this scheme will recognize the availability of facilities capable of responding when the system needs them.
Future auctions will be open to a variety of technologies, including combined cycle, batteries, pumped hydro, and demand response . This technological neutrality raises a crucial question: how to ensure the necessary backup power without allocating the majority of payments to existing facilities, while simultaneously generating a signal capable of mobilizing new capacity.
Although expectations are positive, the sector warns that European authorization alone does not guarantee the immediate launch of the market. Following the order, the auction rules, firmness coefficients, availability obligations, penalties, and contract durations will need to be defined.
The calendar: September appears as an opportunity, not as a certainty
The Association of Electricity Companies (AELEC) believes there is still time to hold the first auction in 2027. Its president, Marina Serrano, explained that the organization had hoped the mechanism would be approved before the holidays, a possibility that would have allowed more time to prepare the call for bids.
Despite the delay, AELEC maintains that September is a possible month for finalizing the regulations. The association believes the current design aligns with models implemented in other European countries and understands that any necessary adjustments can be made as implementation progresses.
“If it’s approved in September, then we have to approve the resolution and the auction rules so we can call for the first auction next year. That’s the timeline we’re working with, and we believe we could be ready in September,” Serrano told Energía Estratégica.
José Luis Bernal Albendín, an energy expert and communicator who heads the Energy Office at the Chamber of Commerce and Industry, takes a more cautious stance. While he considers approval possible in September, he distinguishes three stages: the publication of the order, the holding of the auction, and the start of the actual provision of the service.
A first call for tenders in 2027 remains viable, but will require Red Eléctrica, the State Secretariat for Energy and the National Commission for Markets and Competition to move forward in parallel with the procedures, systems and the qualification of participants.
“September is still possible, but I wouldn't present it as a certainty. It's worth remembering that the mechanism, as state aid, was already authorized by the European Commission on May 29, with an estimated budget of €9 billion over ten years. What remains pending is the approval of the ministerial order that creates and regulates the market in Spain,” Bernal stated.
In his view, the ministerial order currently represents the main political obstacle. Once published, the risk will shift to implementation: the volume of power to be contracted, the delivery terms, maximum prices, guarantees, and availability tests will still need to be established. Therefore, he warns that publishing the regulation in September will not, in itself, guarantee that the auction can be held during 2027.
The technological dispute: between existing backup systems and new batteries
One of the most sensitive points will be the distribution of payments between technologies that already provide support and those that need a signal to finalize new investments.
Pedro Fresco , CEO of AVAESEN, values the creation of the mechanism for its ability to mobilize storage projects, but warns about a possible design that concentrates resources in existing combined cycle plants.
“The capacity mechanism that has just been authorized is another piece that will allow a certain number of batteries to be mobilized. It’s positive, although it will need to be properly implemented. It’s important that this capacity mechanism not be used to prioritize combined cycle gas turbines, but rather that it be primarily used to introduce battery capacity.”
Fresco believes the Ministry must prevent the scheme from only subsidizing existing facilities, without contributing to the incorporation of technologies that the system will need in the coming years.
AELEC, on the other hand, advocates for the coexistence of different solutions. Marina Serrano believes that combined cycle power plants will continue to be necessary as backup, but points out that batteries, renewables, and demand management should also have access to the auctions.
From their perspective, the capacity market should not be the sole source of revenue for storage systems. Batteries will also need to participate in other operating markets and receive compensation for the various services they can provide to the grid.
Lluís Millet Biosca, principal storage consultant at One Hub Energy, believes the overall approach aligns with industry expectations. The rules used to calculate coverage requirements are standard across Europe, although the Spanish auction model could complicate bid preparation.
“The way in which firm power is calculated will also be important. As for the type of auction, the Spanish model is somewhat less common compared to other European markets and will make it a bit more complex to construct bids for those who want to participate.”
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Millet anticipates that combined cycle power plants and energy storage systems will be the main players. At the same time, he notes that the capacity market will only be one part of the battery business model, whose main long-term driver will continue to be energy arbitrage.
Investor expectations depend on contracts and recognized power.
For BESS projects, one of the decisive elements will be the so-called derating factor . This coefficient establishes what percentage of a technology's nominal power can be considered firm and, therefore, receive payments within the capacity market.
Ana Barillas, managing director for Iberia and Latin America at Aurora Energy Research, maintains that this factor will determine the mechanism's actual weight in financial models. Batteries will have to compete with technologies that have already paid for themselves or with known fixed costs, such as combined cycle power plants, and will not necessarily charge for their full nominal power.
Aurora believes that capacity payments will be positive, but insufficient if they are not accompanied by clear remuneration for other services, such as flexibility, frequency control, reservation, and synthetic inertia.
“What has always been lacking is clear remuneration for all the services that storage can provide to the system,” Barillas warned.
The duration of the contracts will also be a determining factor. According to the directive, banks are paying less and less attention to the potential for extraordinary returns and are focusing instead on the proportion of income that can be guaranteed. In this context, a contract that is too short will hardly allow for the financing of an asset whose recovery requires a longer timeframe.
Iosu González Albín , head of photovoltaic engineering and BESS at Kalin Electricity Solution , also considers regulatory stability an essential condition. His concern is to prevent successive auctions from driving prices down to the point of weakening the incentive for new projects.
“It’s a huge opportunity for engineering, but it needs a stable regulatory framework. To provide certainty for capital, long-term availability payments are required; if the price drops in every auction, we risk repeating the investment paralysis we already experienced in the photovoltaic sector.”
Álvaro Simón, founder of ASB Renewables Consulting , shares this expectation, although he warns that there is still not enough information to automatically incorporate these revenues into financial models.
“The news was received with great optimism because it is an expectation that had been demanded for a long time,” he said.
For Simón, the true value of the mechanism will lie in its combination with the wholesale market and adjustment services. This combination could provide greater predictability for projects, but it will depend on the regulation going beyond mere announcements and establishing a concrete expectation of return.
Andrea Azacon , project manager at Menapy, sees a particular opportunity for assets installed at industrial clients. In these projects, the combination of photovoltaic generation, storage, and charging infrastructure allows for the joint management of production and consumption.
“Yes, we see a significant opportunity in the development of the capacity market, especially for projects that integrate photovoltaics, storage, and charging infrastructure. That is precisely why we understand these technologies as an energy ecosystem, and not as independent assets: combined, they allow us to optimize generation, manage demand, and provide greater flexibility to the system.”
The new market could add a complementary source of value to those facilities, provided that the projects are designed from the outset to meet the needs of the system and participate in the different markets.
The risk that the mechanism will arrive late
Regulatory delays are beginning to affect projects that must make investment decisions without yet knowing the conditions of future auctions.
Raúl García Posada , director of ASEALEN , warns that Spain has taken too long to activate the mechanism and that each further delay leaves mature projects without visibility regarding their revenue. This uncertainty hinders access to financing and could jeopardize the achievement of national storage targets.
“The risk of it being late is real. Spain has taken too long to implement it, and many investment decisions are being made now,” he stated.
ASEALEN believes the capacity market should provide a predictable revenue base, but not replace arbitrage or the energy, balancing, and flexibility markets. Its attractiveness for batteries will depend on firmness coefficients recognizing different durations and contracts reflecting actual construction and financing timelines.
The association identifies Belgium as a relevant example. The country combined an open capacity mechanism for storage with operational balancing markets and adapted its calls for proposals to the development timelines of different technologies. According to García Posada, Spain can learn from this experience by adjusting its rules to facilitate projects that combine diverse revenue streams.