Spanish Grid Balancing Shifts Toward Flexible Generation

On October 28-29, 2026, Endesa (ELEZY) and Naturgy (GASNY) said in third-quarter earnings calls that demand for Spanish grid ancillary services was increasing. Flexible thermal generation earned more revenue while retail supply absorbed part of the added cost. Endesa reported that system costs were up 40% through September, while Naturgy attributed EUR 77 million of improvement in Spain to stronger ancillary-service demand and grid constraints.[1][2]

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Solar-hour pricing is moving grid support outside the power pool

As Spain adds solar generation, combined-cycle gas plants find it harder to run economically during low-price daytime hours. These plants once provided synchronous operation, reactive power, and balancing support while selling electricity in the ordinary market. When solar pushes spot prices toward zero, the grid operator must procure those services separately. Naturgy described the sequence directly: higher photovoltaic penetration removes combined-cycle plants from the daily market during solar hours, so their grid support moves into ancillary-service procurement.[2]

Post-blackout operating changes have reinforced this demand. Iberdrola said Red Electrica changed system operations after the blackout and began scheduling more synchronous units.[3] Flexible thermal plants therefore derive value not only from electricity sales, but also from being available to stabilize and adjust the system when required.

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The same system cost helps generation and hurts retail supply

Endesa's disclosure shows that ancillary-service growth can lift flexible-generation revenue while increasing retail supply costs. The company said total ancillary-service costs exceeded EUR 4 billion through September and could reach EUR 5.5 billion to EUR 6 billion for the year. Its retail supply business absorbed an approximately EUR 200 million negative impact, partly offset by about EUR 100 million from thermal generation.[1] Most business-to-business contracts can pass the cost through, but protected retail customers do not bear it fully, making contract structure central to the margin effect.

Naturgy reported the effect from the generation side. Thermal-generation EBITDA reached EUR 601 million in 2026, up 15%, with results in Spain improving EUR 77 million mainly because of stronger ancillary-service demand and grid constraints.[2] Together, the disclosures indicate that value is moving toward flexible plants, although integrated utilities may experience an internal offset between generation gains and retail pressure.

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Regulation and substitute assets set the boundary

The shift could last for several years, but the current allocation of gains and costs may not be permanent. Naturgy expects photovoltaic capacity to keep entering service and said substitutes such as synchronous condensers and reactive-power investments would not come online for another two to three years.[2] Endesa expects security costs could eventually be socialized across consumers through regulation, as in Portugal, reducing the burden now concentrated in retail supply.[1]

The industry interpretation also has a clear counterpoint. Iberdrola argues that enough synchronous capacity existed before the blackout and that system operation, rather than a physical shortage, was the main problem.[3] The useful confirmation metrics are total ancillary-service cost, combined-cycle constraint revenue, retail margins, and changes to regulated cost allocation. A durable profit-pool shift requires these measures to remain aligned.

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Companies exposed to the shift

• Iberdrola (IBDRY): Its Spanish generation, pumped storage, and retail operations face the same split between flexible-capacity revenue and customer-supply costs, but the net impact across those businesses remains undisclosed.
• EDP (EDPFY): Its Iberian flexible-generation and customer-supply activities sit on opposite sides of the mechanism; the effect depends on whether ancillary-service gains outweigh added retail costs.

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Sources

[1] Drillr · Endesa · 2026-10-28 · Q3 2026 earnings call

[2] StockAnalysis · Naturgy · 2026-10-29 · Q3 2026 earnings call · https://stockanalysis.com/quote/bme/NTGY/transcripts/715614-q3-2026/

“Some years ago, those ancillary services were provided by combined cycles automatically by participating in the daily pool market. Once there was this high photovoltaic penetration with zero prices or near zero prices, then combined cycles could not continue providing services during the solar hours. They need to provide the services through ancillary services. There is huge correlation.”

[3] Drillr · Iberdrola · 2026-07-22 · Q2 2026 earnings call

[4] Drillr · EDP · 2026-07-30 · Q2 2026 earnings-call structured summary

This article identifies potentially overlooked industry changes and companies. It is not a stock recommendation.