The auctions, which will commence in June 2007 and be held every three months until June 2008, are to ensure that the companies comply with the Spanish royal decree that obliges them to offer virtual power plant (VPP) capacity via competitive and transparent auctions, as a way of contributing to the development of the Spanish electricity market.
Within the royal decree, which set the electricity tariff for 2007, the Spanish ministry for industry, tourism and commerce included an additional provision requiring Endesa and Iberdrola to undertake five VPP auctions targeted at all agents within the Spanish electricity sector, in order to increase the amount of electricity acquired via bilateral contracts and stimulate market liquidity.
The companies said that the VPPs will consist of option contracts to purchase energy up to a specific hourly capacity, at a predetermined price. The options will, in turn, be divided into base-load and peak-load options, with durations of either three, six or nine months. The timeline for delivering the options will run from July 1, 2007 to June 30, 2009.
The auction process will be supervised by the Spanish energy commission to ensure that all criteria regarding competitiveness, transparency and legal compliance are met.
