Spain’s capacity market to give BESS a bankable revenue floor

The European Commission’s approval of Spain’s capacity market mechanism is expected to provide battery storage projects with a reliable revenue base, which the country’s battery storage industry association said could accelerate project financing and deployment.

The mechanism is designed to remunerate installations capable of guaranteeing firm power and availability when the system requires it, covering both existing plants at risk of closure and storage projects that can contribute to system security. Operational rules, participation conditions, and award criteria are still to be defined in the coming months, with the first auctions expected to follow.

Luis Marquina, president of the Spanish Battery Storage Association (AEPIBAL), said the capacity market is not primarily a storage incentive mechanism but a system security tool in which storage — particularly standalone projects — is expected to play a significant role. He said the approval is a clear signal of how flexibility is becoming as important as generation itself and that storage and demand management are set to be the axis around which the new energy model pivots.

On financing, Marquina said the mechanism could be a key accelerator for BESS investment. He said projects will have at least a certain income base on which to begin building project financing, which he described as very important for BESS bankability. He highlighted the de-rating factor — the coefficient determining each technology’s effective contribution to supply security — as a critical variable that will determine storage’s competitiveness against other technologies, and said Red Eléctrica’s final proposal on this point will be decisive.

The competitive auction design also drew positive comment from the sector. Marquina said the structure will allow the system to obtain reduced prices, particularly if developers incorporate public subsidies already secured through programs such as FEDER funds or PERTE energy transition grants into their bids.

AEPIBAL said the text approved by the European Commission closely matches the latest draft submitted by Spain’s Ministry for Ecological Transition, which it said opens the door to a rapid launch of the mechanism. Marquina said if that is confirmed, the first tender call could be imminent.

From pv magazine España