The energy crisis that began in Spain saw a new system introduced to cut emergency light usage during urgent moments and to replace the older interruption service. The mechanism allows large industrial facilities to reduce electricity consumption when needed, ensuring that production and demand, which must be balanced across the country, stay aligned. The Electrical Network is now seeking more industrial plants or energy companies willing to temporarily halt operations in 2024 for a fee of one million dollars.
The manager of the Spanish electricity system is finishing a tender process that runs from November 30 to December 4, with factories submitting bids. Winning companies will propose the amount of electrical power they can stop using for a few hours as the price for halting work.
The active demand response service has operated for a year, but the mechanism activated in the previous tender at the end of 2022 expired on October 31 and will not be active again until January 1, 2024. This means the Spanish electrical system will work for two months without this protective tool to avoid interruptions. REE sources note that there are other balancing mechanisms that remain fully functional during this two month gap.
The next tender sets conditions for an active demand response requirement of up to 1,812 megawatts of power, compared with the 1,352 MW maximum envisioned in last year’s bid. In reality, less than half of that intermittent capacity was tendered previously. Last year, factories were required to shut down only once. REE projects about 69 activation orders during 2024 for this special service, equating to factory shutdowns totaling 207 hours spread across three hour blocks.
One stop in a year: 94 million
Red Eléctrica organized the prior auction in October 2022 to recruit large electricity consumers, marketers, and market agents willing to halt consumption if necessary for a fixed fee. As a result, the peninsula’s electricity system plans to reduce consumption for a year by 497 MW at selected times to maintain balance between production and demand.
Factories bidding in the active demand response tender received a fixed fee of 69.97 euros per assigned MW hour, recognizing that they must standby for a total of 2,714 hours per year while ready to provide emergency service. About 31 percent of the year’s hours occur in different daily periods that vary with workdays and months.
Total procurement reached 94.3 million euros for a year for a fixed amount, with additional payments made for each shutdown based on duration and market electricity prices at the time. Last year the protection system activated only once, with a shutdown on the night of September 4 when REE ordered mandatory closures to curb national electricity use to prevent an imbalance caused by insufficient generation to meet all demand with guarantees.
On that evening, Red Eléctrica directed factories to stop consuming electricity at 21:59 to avert a problem stemming from an unplanned closure of the Ascó nuclear plant in Tarragona due to an internal fault. Wind generation was lower than expected and exports increased, according to official sources.
Official REE records show that on the night of September 4 all available 497 MW were ordered offline, reducing electricity consumption by 1,424.7 MWh. The affected factories received an extra €189,756 in compensation, calculated as €133.19 for each of the 1,424.7 MWh not consumed that night, in addition to the fixed annual charge.
That night, many factories paused operations out of concern for noncompliance. The new active demand response system, approved by the government within the Energy Security Plan a year earlier to swiftly reduce high electricity demand, especially in large industry, commenced operation. Its aim is to support the electrical system during stressed conditions.
Red Eléctrica notes that although the emergency system was activated, there was no risk of a power outage that night. Continuity of supply was never compromised; the activation order sought to maintain reserve levels set in operating procedures in response to a specific situation where available resources were reduced, according to the system administrator’s officials.
Billions at stake in the outage
The active demand response system is designed to be used only at certain times to ensure continuity of supply during periods of energy shortages for services within electricity market regulation, such as replacement reserve or tertiary regulation. Factory closures can last up to three hours per day for each participant, with at least 15 minutes notice.
The current active demand response service replaces the old blackout method that Spain used for more than a decade, from 2008 to 2019. The new system aims to prevent imbalances between production and demand by integrating into the system’s own adjustment services, while earlier blackouts served mainly local security concerns caused by limited supply and rising electricity prices. Only fifteen companies participate in the current service, whereas the former system paid many more large factories.
The new system cost just over $94 million in its first year and was used once. The cost of the uninterruptible service accumulated in electricity bills over twelve years reached €5.258 billion. In 2019 that amount was about €200 million, but in earlier years it often exceeded €500 million per year. In 2014 it was close to €660 million.
From 2008 to 2017, Red Eléctrica rarely used the blackout mechanism, prompting only five hours of mandatory shutdowns at a rate of about 88 hours per year. In the final two years of its existence, a government reform made it easier to activate the system for economic reasons to prevent sharp electricity price spikes caused by imbalances. In 2018 the blackout was triggered 50 times, and in 2019 only 3 times.