The transformation of the Spanish electricity system takes a new step with Order TED/966/2026, of September 15, published in the BOE on September 17, 2026 and in force since the 18th.

The regulation officially creates the capacity market for the Spanish peninsular electricity system, a mechanism designed to ensure that there is sufficient firm power available to maintain security of supply as the penetration of renewable energies increases.

For the energy storage sector, and especially for BESS (Battery Energy Storage Systems) projects, the new regulation is particularly relevant: storage is expressly included among the resources that can participate in the market.

The consequence is significant. A battery will no longer have to rely solely on price arbitrage, balancing markets, or other electricity services for profitability. The capacity market potentially introduces a new revenue stream: charging for providing firm power and being available when the electricity system needs it.

What is the new capacity market?

The concept is relatively simple.

In the conventional electricity market, remuneration is primarily based on the energy produced or exchanged. The capacity market introduces another variable: the value of having power available during critical times for the system.

The Order defines the capacity service as a firm power availability service that allows responding to possible supply problems detected in the coverage analyses of the peninsular electricity system.

The mechanism will have a peninsular scope, will be centralized and will be based on the firm power needs identified by the system operator.

The necessary capacity will be contracted through competitive procedures.

Therefore, for a successful bidder, the economic asset will not only be the MWh produced or stored. Its capacity to contribute firm MW to the system will also have value.

 Why does Spain need this mechanism?

The reason is directly related to the energy transition.

Spain is incorporating large amounts of solar photovoltaic and wind energy. Both technologies allow for the generation of electricity with low emissions, but they share a fundamental characteristic: their production depends on the availability of the renewable resource.

There can be a huge installed photovoltaic capacity and yet have virtually no solar contribution during certain nighttime hours.

Something similar happens with wind power when weather conditions simultaneously reduce production.

Therefore, an electrical system with a high renewable penetration needs to combine three elements: renewable energy, flexibility, and firm power.

It is precisely in the last two where technologies such as batteries acquire a strategic role.

The capacity market aims to ensure that the system has sufficient resources to respond in situations where available generation may be insufficient to meet demand.

 Who can participate?

One of the most interesting aspects of Order TED/966/2026 is that the market is not limited to conventional power plants.

The regulation allows participation, provided that the established requirements are met, of electricity producers, owners of storage facilities, end consumers, demand aggregators and entities that aggregate production and storage.

This introduces a relevant principle of technological neutrality.

A power plant, a battery, or a group of consumers capable of modifying their demand can contribute capacity to the system in different ways.

The important thing will be to determine how much firm power each resource can actually provide.

BESS batteries face a new source of revenue

For the storage sector, this is probably one of the points of greatest interest.

Until now, the economic model of a battery connected to the electrical system could rely on different sources of income.

These include energy arbitrage —buying or storing electricity when prices are low and selling it when they are high— and participation in different markets and balancing services.

The capacity market potentially adds a new layer to the so-called revenue stacking of BESS projects.

A project could combine income from different activities, provided that the regulations and obligations assumed in each market are compatible.

This may change the way the profitability of future installations is analyzed.

Instead of only studying the hourly differentials in the electricity market, developers will need to incorporate a new question into their financial models:

What is the value of the firm power that this battery can provide to the system?

 Installed capacity will not be the same as firm capacity

This distinction will be especially important.

A 100 MW battery does not necessarily automatically have 100 MW of firm power recognized for the purposes of the capacity market.

The Order contemplates the establishment of firmness coefficients by reference technology.

These coefficients will allow us to determine the power that each technology can effectively contribute to meeting demand, taking into account its availability and reliability characteristics.

In storage, the relationship between power and energy will be especially relevant.

A battery is not the same as:

100 MW / 100 MWh

that a battery of:

100 MW / 200 MWh

or a facility of:

100 MW / 400 MWh.

Although all three have the same nominal power, their ability to sustain a certain output for several hours is completely different.

Therefore, the methodological development of firmness coefficients will be one of the regulatory aspects that the BESS sector will have to monitor most closely.

Three types of auctions

The market is structured through different hiring horizons.

The main auctions will be aimed at covering structural firm power needs. They will include a period between the award and the start of service provision, allowing projects that still need to be developed to compete.

This is especially relevant for new investments.

A developer could obtain an award before the project is built and use that visibility of future income within the economic and financial structure of the investment, always subject to the specific conditions of each call for proposals.

The adjustment auctions will allow capacity needs identified in the near future to be met.

Finally, there will be transitional auctions until the first service period associated with the main auctions begins.

The result is a system that attempts to combine long-term economic signals with instruments capable of correcting more immediate capacity needs.

 How will the capacity be allocated?

The Order establishes a competitive procedure based on economic offers.

Bids will be submitted in sealed envelopes and the award will follow a pay-as-bid system.

This means that the successful bidders will receive the price corresponding to their own awarded bid.

The economic variable will be expressed in euros per firm MW per year.

For the participants, the bidding strategy will therefore be of considerable importance.

Knowing the installation cost alone will not be enough. It will be necessary to accurately estimate the value of the capacity offered, future obligations, the risk of unavailability, and potential revenue from other markets.

The hours of stress will be decisive

The concept of system stress hours will be another key element.

Capacity providers will need to guarantee certain levels of availability during these hours.

For a battery, this introduces a fundamental operational question: the state of charge.

A facility may be technically available and yet not have enough stored energy at that time to maintain the required delivery.

Therefore, BESS operators will have to integrate capacity market obligations into their operating algorithms.

The economic optimization of a battery will no longer depend solely on variables such as: hourly electricity price + balance markets + degradation.

It will also be necessary to incorporate: probability of critical hours + capacity obligations + minimum load status + penalties for non-compliance.

This combination can increase the sophistication of the EMS (Energy Management System) systems used to manage the facilities.

 Greater importance for EMS, PCS, and power electronics

The capacity market has implications not only for developers and investors.

It can also create opportunities for manufacturers and technology integrators.

The participation of a battery in multiple markets requires precise coordination between different layers of the system:

BMS + PCS + EMS + communications + system operator.

The BMS must guarantee safe operation of the cells and modules.

The PCS or power conversion system must meet the required performance requirements.

And the EMS will have to decide when to load, unload or reserve capacity taking into account the different electricity markets simultaneously.

As the number of revenue streams for a BESS increases, so does the importance of optimization software.

The value of an installation will depend less and less exclusively on the hardware and more on **how that hardware is managed within the electricity market**.

The secondary market adds flexibility

Another interesting development is the creation of a secondary capacity market.

The rights and obligations arising from the service may, under the established conditions, be subject to assignment or transfer.

This can be especially useful when a successful bidder anticipates that they will not be able to meet their commitments.

Instead of simply dealing with the consequences of a default, the secondary market introduces a tool to transfer certain obligations to another enabled resource.

In addition to increasing flexibility for participants, it can encourage the emergence of new activities in aggregating and optimizing energy asset portfolios.

What happens if a battery is unavailable?

Charging for capacity implies assuming obligations.

Suppliers will need to demonstrate that the committed power is actually available.

The regulation includes verification mechanisms, service testing, and payment obligations associated with non-compliance.

For a BESS project, this means that the revenue maximization strategy will have to be balanced with the risk of not being able to meet the capacity commitment.

An operator could find attractive economic opportunities in other markets and still decide to reserve a portion of the battery to ensure compliance with its obligations.

In other words, a new opportunity cost will appear:

Is it more cost-effective to use the battery now or to conserve capacity to guarantee the commitment made?

Optimization algorithms will have to continually answer this question.

 An additional signal to fund storage projects

One of the possible effects of the capacity market will be on the financing of new projects.

Battery revenues obtained exclusively through arbitrage can be difficult to project in the long term because they depend on the future evolution of electricity prices.

Revenue associated with a capacity allocation for a specified period can introduce an additional source of economic visibility.

This does not mean that the capacity market alone will guarantee the profitability of BESS projects.

The outcome will depend on the volume of contracted capacity, the prices obtained in the auctions, the applicable firmness coefficients, the duration of the contracts, and the obligations imposed on the successful bidders.

But it does add a variable that developers, banks, investment funds and manufacturers will have to incorporate into their models.

There will also be opportunities for flexible demand

Batteries are not the only potential beneficiaries.

Consumers who are able to temporarily modify their consumption will also be able to compete to contribute capacity to the system.

For certain industries, data centers, air conditioning facilities, processes with thermal storage, or consumers with behind-the-meter generation and storage, flexibility can progressively become an economic asset.

Aggregation will also allow numerous small resources to be brought together and presented jointly to the market.

This could drive new Virtual Power Plant (VPP) platforms capable of coordinating batteries, distributed generation, and flexible demand.

 Who will finance the market?

Creating additional capacity comes at a cost.

The Order establishes that the financing of the service will correspond to the electricity marketers, including the default marketers, and to the direct consumers in the market.

The mechanism will be implemented through differentiated unit prices according to tariff segments and time periods.

Therefore, the capacity market should not be analyzed solely from the perspective of the new revenue it can provide to certain technologies.

It will also be necessary to consider its total cost and its impact on the system and consumers.

What remains to be discovered

The publication of Order TED/966/2026 is a decisive step, but it does not mean that all the details of the market are finalized.

The operating procedure developed by the mechanism must specify essential aspects such as the technical and documentary requirements for participation, the qualification procedure, the tests, the verification mechanisms, the settlements, the financing and, especially, the methodology for calculating the firmness coefficients of each technology.

For the BESS sector, these details can be as important as the creation of the market itself.

The minimum energy duration required to compete, the recognized firm power, and the availability conditions can directly influence the optimal design of future projects.

 From selling MWh to also selling availability

Order TED/966/2026 reflects a deeper transformation of the electricity system.

For decades, the electricity business was primarily focused on producing and selling energy.

In a system with ever-increasing renewable penetration, value is also beginning to shift towards other variables: flexibility, storage, availability and firm power.

And this change may be especially relevant for energy storage.

BESS batteries have the capacity to move between different markets and provide multiple services using the same physical asset. The new capacity market adds another possibility to that model.

The big question for the coming months will be to know the specific conditions of the first auctions and, above all, the firmness coefficients that will be assigned to storage.

These parameters will largely determine how much additional value a battery can capture within the new Spanish electricity market.