A major move is underway as the electricity sector in the region finalizes details to run the first privately organized renewable energy auction this September. The objective is to stage a competition that mirrors government auctions but occurs between large energy buyers and the promoters of renewable parks. The aim is to secure long term supply agreements that align with the interests of heavy electricity users who want predictable, affordable power. A top industry executive notes that regulatory consultations are in progress and that public comments are expected by the end of July so the consultation can be published and all documents prepared for the September auction, an effort led by the sector association representing large energy consumers.
The auction targets a total capacity of 1,500 to 2,000 megawatts of renewable technology, encompassing photovoltaic installations and wind farms. The plan envisions plants built in Turkey and a tender where new developers would sell energy on 12-year contracts to these large buyers. The objective is to move from the current state of offers to a structured, long term trading framework. After 18 months from the initial offer window, roughly between March and April 2024, industry participants expect to see serious engagement from generators and a rising interest in the auction mechanism. The appetite for competitive pricing remains strong, with expectations that prices will settle around 30 to 35 euros per megawatt-hour, consistent with outcomes from the most recent auction conducted by the electricity market manager.
What makes this auction unique is that it marks the first time a renewable energy tender of this scale is conducted privately, outside official government channels. Crucially, government authorization is secured through the Spanish Reserve Fund for Electrodense Assets Guarantees, commonly known as FERGEI. This fund, established with 600 million euros and configured to provide 200 million euros annually over three years, originated in mid-2020 as part of the Electro-intensive Industry Regulation adopted by the cabinet. Its purpose is to mitigate the financial risks faced by large industrial electricity consumers when they engage in long term power trading at the state level. FERGEI acts as a safety net, enabling developers to access a state-backed guarantee while selling energy under long term contracts to major buyers.
Beyond the decarbonisation commitment, the FERGEI-backed auctions are attractive because they deliver a credible state guarantee to developers. Access to this guarantee requires compliance with the Electro-intensive Industry Code, which specifies that around 10 percent of annual consumption for the industry should be sourced from contracts signed for a minimum of five years. This framework is intended to incentivize long term power purchasing arrangements that align with broader climate and energy security goals.
To benefit from FERGEI’s risk coverage, companies had to demonstrate their eligibility within one year of the measure’s entry into force in November 2021. In practical terms, the deadline was set for November this year to sign qualifying agreements. However, no private power purchase agreements that utilized the Government-backed guarantee were finalized by the end of the previous month. Industry observers have cited price volatility over the past year and a half as a key factor delaying engagement. In response, the managing body has extended the accreditation window for the two core conditions—10 percent of consumption under long term PPA contracts signed for at least five years—through a royal decree that creates an indirect cost mechanism for carbon emissions for a three year period, with November 2024 marking a pivotal date for securing the necessary approvals.
In Spain, the landscape shows a relatively small share of industries relying on long term contracts. The majority still participates in the wholesale market known as the pool, which has experienced notable price spikes in recent months. These dynamics have pushed some companies to pause operations when faced with high energy costs. The new privately run auction is anticipated to bring much more stable and affordable pricing for major buyers from 2024, with prices expected in the range of 25 to 30 euros per MWh, depending on market conditions and project execution risk. This shift is viewed as a potential market correction after a period of volatility, providing relief to large consumers who have faced uncertain electricity bills.
Industry executives emphasize that the immediate concern is not merely the year 2024 but the broader trajectory of energy affordability over the next several years. They advocate maintaining existing measures such as toll reductions while the sector explores new mechanisms. There is a call for the government to initiate marginal tenders that compel major utilities to auction portions of their energy to large consumers and independent marketers before the end of 2021. A synchronized approach, combining private auctions with public policy levers, could secure lower price offers and ensure liquidity in the market. The overarching goal remains clear: deliver competitive, long term electricity contracts to large users, driving stability and investment in renewables while supporting broader decarbonisation targets across the sector.