During September, Spain registered at least 334.8 MW of energy storage in ten files published in the Official State Gazette (BOE), in parallel with the approval of Order TED/966/2026, which created the capacity market and opened the possibility of accessing remuneration contracts of up to 15 years for new investments.
In an interview with Energía Estratégica, Carlos Simón Cabo, a specialist lawyer and partner at Ambar, identified four factors that financial institutions should evaluate before incorporating capacity contracts into the financing structures of battery energy storage systems (BESS) : the absence of indexation of awarded prices, penalties for non-compliance, economic guarantees, and the lack of express regulation on the pledging of collection rights.
The distinction is relevant because the mechanism establishes a fixed monthly remuneration for the provision of capacity services , but this predictability does not eliminate the risks associated with the technical availability of the facilities or the contractual obligations that its operators must assume.
“A fixed monthly income stream is an attractive source of stable and recurring revenue,” the interviewee noted, although he cautioned that funders should examine the specific terms of that income and its potential for default.
The first issue was the lack of indexation of the contract price . As explained, the amount was not automatically updated, a feature particularly relevant for long-term commitments, where operating and maintenance costs can change over the life of the contract.
The second risk is linked to penalties for failing to meet the committed firm capacity . Their calculation will depend on the firm capacity not delivered and the average award price, meaning that the actual availability of storage and battery degradation will have a direct impact on the financial evaluation. This condition introduces an additional requirement for developers: it will not be enough to guarantee the initial technical capacity of the system; they will also have to consider its performance throughout the entire service provision period.
The third aspect concerns the financial guarantees required by the mechanism , the regulatory development of which was still pending. These obligations must be considered both during the pre-commissioning period, where applicable, and during the actual provision of capacity services.
Finally, Simón Cabo pointed out the uncertainty surrounding the pledging of collection rights , a tool through which financiers can receive these rights as a guarantee of loan repayment obligations.
The Order does not expressly prohibit this possibility, but neither does it establish specific regulations for its application. This lack of regulatory development added a legal issue that entities will have to analyze before considering these revenues within their financing structures.
The specialist also specified that capacity contracts may coexist with bilateral power purchase agreements (PPAs) or battery operation and remuneration contracts ( tolling ) , provided that the obligations assumed are not incompatible with the availability commitments required by the mechanism.
In this way, the new remuneration could complement other sources of income from storage, although its effective contribution to financial closure will depend on the final regulatory conditions and the distribution of risks among promoters, operators and financiers.
A difference of up to 14 years that could alter the BESS schedule
Beyond banking conditions, the specialist identified another variable capable of modifying the profitability and financing of projects: the date on which they obtain their operating authorization with respect to the auction call .
The regulations distinguish between existing facilities and new investments from that administrative milestone onward. Projects that already have an operating license before the call for tenders will be considered existing facilities and, in the main auctions, will be eligible to obtain 12-month service contracts.
In contrast, facilities that do not yet have this authorization may be classified as new investments, provided they meet the remaining requirements, and may opt for contractual periods defined by technology, with a maximum of 15 years .
The difference between the two extremes reached 14 years and generated a particularly relevant consequence for BESSs that were under construction or close to reaching the Ready to Build (RTB) phase.
"The fundamental question is always the same: whether they arrive on time and in what category," the interviewee explained regarding the inquiries received from developers seeking to define their position regarding future auctions.
As he explained, new investments will also be able to have up to five years between the award and their commissioning, while existing facilities will have to participate again in the corresponding calls for bids to maintain that source of remuneration.
This difference affects the stability of cash flows and the projects' ability to service their debt. Longer-term commitments would offer greater certainty to financial institutions, while the need to compete annually would introduce an additional risk to revenue continuity.
However, accessing the new investment category will not automatically guarantee a 15-year contract, the effective duration of which will depend on the conditions applicable to each technology.
Nor will it necessarily mean that delaying the start of operations is economically advantageous. The decision must take into account the administrative timeline, the obligations associated with permits, the revenue that could be generated during that period, and the terms of the calls for proposals.
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For this reason, Simón Cabo recommended reviewing the development phase of each facility, the operating authorization forecasts, and the validity of access and connection permits.
The analysis acquired special relevance given the expectation that the first auctions would be held during 2027 , although the Order did not set a specific date for their convocation.
Hybridization added another economic variable compared to standalone BESS systems.
The new framework also introduced differences in the treatment of stand-alone storage systems and those integrated with existing renewable facilities.
This issue gained importance within the Spanish portfolio. The Strategic Energy survey of publications in the Official State Gazette (BOE) for September showed that some developers prioritized the incorporation of batteries over assets that already had generation capacity, permits, or developed electrical infrastructure.
Among the identified projects were BESS FV La Puebla 3, with 150.8 MW of storage in Huelva; Pegaso, with 31 MW in Valladolid; and BESS Hibridación Virgen de Areños III, with 35 MW in Palencia .
The growth of these configurations made a capacity market arrangement particularly relevant: the so-called hybridization new investment threshold .
In this regard, Carlos Simón Cabo explained that this parameter will establish a minimum relationship between the value of the new investment and that of the existing installation, from which point the lower reserve price will no longer apply to the entire hybrid installation.
If that threshold is exceeded, the project will be able to access different conditions than those that would apply when the new investment does not reach the established limit.
In competitive terms, the interviewee pointed out that a hybrid system could be at a disadvantage compared to a new standalone BESS if it did not exceed that threshold , due to the application of the lower reservation price to the entire installation.
Conversely, exceeding that limit would eliminate that restriction and open the possibility of obtaining higher remuneration, always subject to the outcome of the auction.
Another feature of the regime was that hybrid facility operators could decide how to distribute the allocated capacity blocks among the different modules that make up the project.
However, he clarified that the final competitiveness of each configuration will also depend on the firmness coefficients assigned to the technologies and the specific conditions of each call for tenders.
The pending parameters that will define the investments
Despite regulatory advances, the determination of firmness coefficients continued to be one of the main economic unknowns of the mechanism .
These values will establish what proportion of the installed capacity can be recognized as firm capacity and, therefore, how many megawatts can be offered in the auctions.
“Without it, income cannot be modeled,” the interviewee warned, in dialogue with this media outlet, referring to the firmness coefficient, whose definition will be carried out by technology in each call, following a proposal from the National Commission of Markets and Competition (CNMC).
The lack of specificity also introduced risks associated with the sizing of projects and potential penalties for non-compliance.
In addition, other pending definitions were needed, such as the operating procedure, the firm power requirements to be contracted, and the final economic guarantee regime.
According to the interviewee, new storage projects, with guaranteed access and connection permits, no remuneration incompatibilities, and contracts aligned with the obligations of the capacity market , started from a more favorable position to take advantage of the mechanism.
Thus, the financing of BESS was linked not only to the possibility of obtaining a new source of remuneration, but also to its recognition as a financeable income, to the administrative classification of each installation and to the technical conditions that will determine the firm power effectively remunerated.
By Matías Medinilla
By Emilia Lardizabal
