About the VPP Capacity Auctions

The Ministry of Industry, Tourism and Commerce wishes to establish mechanisms that help to develop a forward electricity market. To this end RD 1634/2006 required Endesa and Iberdrola to hold a series of five auctions offering virtual power plant capacity open to any party who is a member of the Spanish electricity market. A further objective was to increase the proportion of electricity that is purchased through bilateral contracts with a duration of several months and stimulate liquidity in forward electricity markets.

These five auctions were successfully implemented between June 2007 and June 2008. Details of the results have been published and may be found here.

Royal Decree 324/2008 of 29 February 2008 extended the obligation on Endesa and Iberdrola to offer VPP capacity for sale in a 6th and 7th auction to take place in September 2008 and March 2009, respectively.

With the objective of making VPP capacity more attractive and introducing a number of improvements to the way that the auctions are implemented, Royal Decree 324/2008 and Secretary General of Energy Resolution 9155 of 13th May 2008 introduced a number of important changes. These include:

  • Amending the definition of the VPP product so that settlement is made financially rather than by delivery of electricity
  • Removing the requirement to nominate the VPP product in advance of the daily market price being available – in future the option will be exercised automatically whenever it is advantageous for the buyer.
  • Removing the requirement for bidders to be a member of the electricity market
  • Eliminating the 3 month product and changing the auction frequency to once every 6 months
  • Changing the peak product such that it will now be exercised 08:00 to 20:00 CET on all days except Saturdays, Sundays and national public holidays.
  • Increasing the nominal contract size from 2 to 10 MW
  • Placing responsibility for appointing the entity charged with implementing the auction in the hands of CNE who will also supervise the auction for compliance with the relevant decrees and regulations.

Further information about the products may be found here.

Further information about the auction process may be found here.