Market Analysis has consulted with various Spanish energy companies on the details of the recently proposed Spanish electricity capacity market to be finalized later this year. The proposal is for a centralized capacity procurement auction as has been adopted in electricity markets in North America, Europe, South America and elsewhere. A pay-as-bid auction is being considered with a reserve price for existing generation plant, similar to that adopted in Belgium in 2021.
An important difference however, is that the reserve price is to be kept secret in an effort to induce more competitive bidding by existing plant. This is an interesting feature of the auction design which may prove risky for both the bidders in the auction and for the auctioneer, should it find itself committed to rejecting bids in the auction which are above the reserve price but well below the next available bids.
The consultation period for the proposal continues until the end of January.
