This service is activated in response to a power reduction order issued by Red Eléctrica to large consumers that are providers of this service, and that are mainly large-scale industry.
According to the regulation that governs the allocation mechanism for the interruptibility service in the peninsular system, Red Eléctrica is the company responsible for organizing and managing the new auction system that is to allocate the interruptibility service, in a competitive and efficient manner.
Although it is not common, sometimes in the electricity system there are situations where there is not enough generation to supply the demand. This could be due to a peak of extraordinary consumption, or a sudden loss of renewable generation. For example, a sudden change in the weather can affect renewable generation.
When faced with such situations, there are preventive measures that can be taken – one of these is the interruptibility service; a tool that enables the flexible operation of the electricity system from the demand side. Large electricity consumers (large-scale industry), in response to an order issued by the system operator, reduce their consumption to maintain the balance between generation and demand, so that the rest of consumers do not lack electricity. These large energy consumers receive financial reward in return for providing this service.
The power reduction can be performed not only for technical reasons, i.e. in an emergency, but also for economic reasons that may result if the cost of interrupting the supply is less than that for applying system adjustment services .
In the peninsular system exists a competitive allocation mechanism managed by Red Eléctrica, under the supervision of the CNMC (National Commission of Markets and Competition). In order to allocate the service, an auction system with face-to-face bidding is used. It is a competitive and efficient mechanism, similar to that used in other known markets, such as the wholesale fish markets or the Dutch flower auctions.
Two interruptible capacity products are auctioned, one consisting of reductions in consumption of 5 MW and another of 40 MW. This is done using a computerised auction system based on descending price.
Starting from an initial price, the amount goes down in each round at a previously established price. The service is assigned to the last competitor remaining in the auction and who hasn’t withdrawn and, therefore, is willing to offer the service at the lowest.
In the non-peninsular systems, the allocation of the interruptibility service is established by the sign of a contract between REE and the provider, once authorized by the regulator.