The Spanish Council of Ministers has approved a Royal Decree establishing the framework to auction 1.2GW of cogeneration capacity, a move intended to refurbish the country’s ageing industrial cogeneration sector.
The new regulation, proposed by the Ministry for Ecological Transition and the Demographic Challenge (MITECO), enables the granting of a specific remuneration regime for cogeneration installations in Spain. It will be implemented alongside a forthcoming ministerial order.
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Under the government’s revised plan, two separate auctions of 600MW each are scheduled with the first to be held this year and the second in 2027. These will replace an earlier proposal for three auctions between 2025 and 2027.
The tenders will be open to bids for both new builds and modernisations of existing plants.
According to MITECO, the facilities must be high-efficiency and use either natural gas or biomass, with biomass being included in this regulatory scheme for the first time. Natural gas-fired plants must also be able to use at least 10% renewable hydrogen.
The ministry stated that these conditions aim to promote technologies that can reduce the environmental impact of industrial energy generation.
According to sector estimates, cogeneration’s share of national electricity demand has halved from 12% to 6%. More than 300 plants, totalling about 2GW, have shut down after reaching the end of their regulated service life without a replacement framework in place.
The European Commission granted permission in January for Spain’s public aid scheme to support high-efficiency cogeneration, paving the way for the auctions.
Facilities that previously used other fossil fuels will also be eligible if they switch to natural gas or biomass, aligning with decarbonisation objectives.
Emissions from gas plants are capped at 270gCO₂/kWh, while biomass facilities must meet current sustainability criteria.
The Ministry expects that the 1.2GW capacity to be awarded will prevent an estimated 8.4 million tonnes of CO₂ emissions over the plants’ regulatory lifetime.
Technical restrictions include a maximum of 100MW per plant, dropping to 15MW in non-peninsular electricity systems.
High-efficiency requirements will demand at least 10% primary energy savings, with an exception for plants under 1MW, which must still demonstrate some form of energy savings. No single company may be awarded more than 50% of capacity in each process, the ministry said.
The auctions will use a sealed bid format with a descending marginal system, and remuneration will be determined under Royal Decree 413/2014, setting a reasonable profitability value of 7.09% for 2026-2031.
The regulatory lifetime is 12 years for gas plants and 20 years for biomass facilities.
Annual costs for regulated remuneration of the 1.2GW are estimated between €414m ($470m) and €582m ($661m), subject to actual energy prices, plant utilisation and auction discounts.
The Iberian Electricity Market Operator (OMIE) will organise the tenders, overseen by the National Commission of Markets and Competition (CNMC).
The inclusion of these cogeneration projects is part of Spain’s National Integrated Energy and Climate Plan (PNIEC) 2023–30, aimed at increasing system flexibility and efficiency as renewable generation grows.
