Brussels authorized the capacity market on May 29 , valued at up to 9 billion euros over ten years, but Spain still needs to publish the ministerial order and the operating procedure that will allow it to be launched.
The delay leaves open key questions for the storage sector as a whole , including the duration of contracts, the conditions for participation, and the firmness factors that will determine what portion of the power can be recognized within the mechanism.
And what does this specifically mean for pumped storage? Magtel warns that the launch of the capacity market will not, on its own, solve its economic equation . These projects will continue to require a diversified revenue structure to sustain high development costs, intensive CAPEX, and considerably longer payback periods than other technologies.
“The capacity market can represent a revenue stream that, while far from being the main one, can greatly help the bankability of projects since it reduces their exposure risk to the market,” says Arturo Buenaventura , director of the firm’s Hydraulics and Environment Division, in dialogue with Energía Estratégica.
The time dimension explains much of this caution. Even projects nearing ready-to-build status may need between five and seven years before becoming operational, so their viability cannot rest on a single economic indicator whose final impact is still unknown. The model will continue to combine arbitrage, ancillary services, frequency and voltage regulation, black start, and other features linked to system stability .
But that's only the revenue equation once the asset is operational. Before that, there's another hurdle: financing large-scale initial investments and sustaining long periods of development and construction. That's where direct CAPEX support comes in.
In July, IDAE awarded €165 million to seven reversible hydroelectric storage projects within the BORALMAC 2 program , after increasing the initial budget by 83% due to high demand. The selected facilities have a combined capacity of 2,071 MW and 21,091 MWh , while the first round had already mobilized another €100 million for more than 2 GW of new capacity.
The scheme that is beginning to take shape therefore has several layers: aid to reduce part of the initial investment effort, market income during operation, and a future capacity payment intended to provide greater predictability.
It is in this last piece where another debate arises, no longer focused on how much a project will bring in, but on how the capacity it actually contributes to the system will be calculated .
The rating opens the comparison between BESS and pumping
The future resolution of the auctions will have to establish derating factors , which will determine what percentage of each technology's nominal power can be counted as firm capacity. This calculation will be especially relevant for energy storage because two assets with identical MW can offer very different amounts of energy and discharge times.
Buenaventura illustrates this with a direct example : a 300 MW battery operating for two hours provides 600 MWh, while a 300 MW reversible pumping station capable of operating for ten hours provides 3,000 MWh.
“They are assets with the same nominal power, but with a very different capacity to manage renewable surpluses and cover prolonged periods of low generation,” he explains.
For Magtel, that physical difference should have an economic translation when assessing the contribution of each installation to security of supply .
“It seems reasonable that a storage system capable of sustaining power for eight, ten or more hours should have a much higher value than one whose energy capacity is exhausted after two or four hours,” Buenaventura argues.
The company's position, however, does not suggest a substitution between technologies. Since 2020, Magtel has been working on BlueStorage , a portfolio of more than 12 pumped storage projects ranging from 100 to 600 MW, which together exceed 4 GW and 45 GWh of storage capacity. Part of this pipeline has already passed significant development milestones , with projects that have secured concessions for public water resources, access and connection rights, or are currently undergoing the preliminary administrative authorization process.
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Based on that experience, the company advocates a complementary approach to energy storage . Batteries offer a clear advantage in their rapid deployment and integration with renewable energy parks, while pumped storage systems operate on a different scale: they displace large volumes of energy over longer periods and offer features such as synchronous inertia, voltage regulation, and frequency regulation.
This complementarity is precisely what complicates the design of a technologically neutral mechanism. Applying the same access rules does not necessarily imply recognizing in the same way assets that respond differently to prolonged periods of scarcity . The regulatory challenge will be to translate these differences into the firmness calculation without stifling competition or predetermining which solution should be developed.
Two technologies that are advancing at different speeds
While that discussion remains open, the actual rollout is proceeding at a very different pace. In August alone, nine BESS projects totaling 327.6 MW received prior administrative and construction authorization in Spain. Of that total, 277.83 MW correspond to hybrid systems with photovoltaics and 49.74 MW to independent storage.
Many of these projects leverage existing solar plants, permits, and evacuation infrastructure. The model allows for the replication of configurations, reduces some of the administrative risk, and shortens the time between authorization and execution.
Reversible pumping faces a different trajectory. It requires larger-scale civil works, water concessions, environmental permits, and construction processes that can extend over years.
“Batteries are processed, authorized and installed more quickly than reversible pumping systems, which, due to the scale of the projects, follow a more complex process and construction periods can be up to five years,” Buenaventura points out.
Furthermore, the difference in speeds is not solely due to the construction characteristics of both technologies. In the case of pumping, Magtel currently identifies two obstacles capable of halting projects even before they reach the construction stage : the lack of access and connection capacity and the processing of concessions on the public water domain.
Buenaventura warns that “there is practically no available generation and demand capacity at certain points in the grid, and that some of the capacity that could be freed up still depends on Just Transition tenders or new capacity procedures.” This is compounded by the backlog in water concessions, despite Royal Decree 8/2023 specifically recognizing the use of water for energy storage and giving it priority over industrial use.
“Without visibility into the availability of access and connectivity, it is very difficult to move forward with the development of these projects,” the executive points out.
The problem, according to Magtel, is that the different permits are processed separately. A power plant simultaneously needs energy authorization, a water concession, and access and connection permits, so obtaining one of these milestones without resolving the others does not guarantee that the project can be realized.
Therefore, the company places its hopes on the unified processing promoted by the Ministry , both for new developments and for those that have already accumulated years of administrative history.
“It is not enough to accelerate procedures individually; they must be coordinated with each other, because having the concession without access, or access without environmental authorization, does not allow the projects to materialize,” says Buenaventura.
This administrative race introduces a limitation that extends beyond the future design of the capacity market . Even if the auctions ultimately provide a favorable economic signal for long-term storage, the projects need to reach sufficient maturity to be able to take advantage of it . And the timelines are starting to work against the targets set for the end of the decade.
Magtel believes that Spain is already behind in the deployment of hydroelectric storage and doubts that most of the projects currently in the pipeline can be put into service before 2030.
“With 2026 already well underway and given the development and construction timelines for these infrastructures, it is very difficult, if not impossible, for the bulk of Spain’s new portfolio of reversible pumping stations to be operational by then,” Buenaventura acknowledges.