An economic and regulatory framework for insular grids: The case of the Canary Islands

This paper presents the state-of-the art of the electricity market structure, operation and regulation in Spain, focusing on the extra-peninsular electricity systems (SEIE). The main goal is to analyze recent market rules and their remuneration in order to consider new proposals that can improve the insular regulatory framework. In the new context, where Distribution Generation is increasing, their integration in distribution networks is the main challenge for System Operators and distribution companies in order to meet new economic, technical and operational requirements. The question is: what is the best way to remunerate agents in isolated insular systems? To answer this, we focus on the Spanish SEIE, specifically on the Canary Islands, which are not connected to any mainland network.