The peninsula’s electricity system will now have a total of 497 MW of capacity to meet demand from consumers and retailers who participated in the first active demand auction organized by Spanish system operator Red Eléctrica.

Auction participants will commit to reducing their consumption at certain times depending on system needs to ensure a balance between production and demand. The auction result will be applicable between November 1, 2022 and October 31, 2023.

The demand management auction involved retailers and consumers with a demand of at least 1MW and participants in the wholesale electricity market, which excludes domestic users and small businesses as established by law. In this first auction, a total of 16 bidders submitted their bids online.

Successful bidders and demand responders will be awarded €69.97 ($69.72) per megawatt hour allocated to their availability during the service (2,714 hours). The threshold price resulting from the auction is based on economic criteria where bids are ranked from lowest to highest until the system requirement is met.

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Service application criteria

According to current legislation (Royal Decree-Law 17/2022), the service will be applied at certain times to ensure continuity of supply in situations where there is a lack of balancing energy that can be manually activated in the system, such as replacement reserve (RR) or tertiary control.

Applicants awarded the service agree to reduce their demand after being asked to do so with at least 15 minutes notice, for a maximum period of three hours per day.

The service can only be activated Monday to Friday from 8am to midnight, from October to March and from 6pm to midnight, from April to September. Activation of the service is paid at the currently current price for tertiary control for the hour for which the service is requested.

So active response to demand the service is a new tool that will provide additional flexibility to the operation of the electricity system at certain times when there is a shortage of resources and it is necessary to adjust demand and balance it with production.

The measure was approved in September by the Council of Ministers as part of the Spanish government’s Plan+Seguridad Energética (Energy Security Plan), in line with European recommendations to reduce overall electricity demand.

Countries such as France and Portugal, and more recently the UK, have various demand reduction mechanisms similar to these Spanish one.

Red Eléctrica completes first demand response auction