On 9th December the provisional results of the latest Capacity Market auction were announced. A total of 52.4GW of capacity was procured in the auction to provide security of electricity supply in 2020/21. The auction cleared at £22.50 kW / year (2015/16 Prices), which was lower than some forecasts but higher than the clearing price in the 2014 and 2015 auctions. Final confirmation of the results will be announced by the Government in the New Year. National Grid’s publication of the provisional results is available here
Almost 70% of capacity procured in the auction was from existing power stations:
However, the auction also saw a significant increase in new capacity coming from a diverse range of sources.
For the first time batteries were successful in the auction, taking a sizeable 500MW worth of capacity across a number of units ranging in size. Circa 1.4GW of Demand Side Response was procured in the auction, effectively a tripling of last year’s volume, and provides a good opportunity for customers across industrial, commercial and small business sectors to earn revenue for providing flexibility.
Two new sizeable gas-fired generation plants were successful in obtaining 15-year capacity agreements. One was a 300MW OCGT peaking plant at Spalding and the other a 333MW CCGT refurbishment of a mothballed site at King’s Lynn. However, the auction clearing price was too low for other new build CCGT projects.
Circa 1.3GW of new peaking plant generation was procured in the auction, although this was a fraction of the 4GW+ which originally prequalified, indicating that Ofgem’s review of embedded benefits (such as TRIAD avoidance) has had some impact. It also appears that there was less diesel generation than in the past, with somewhere in the region of 75-300MW of new build generators procured, indicating that the Government’s plans to toughen environmental regulations is having an impact.
Interconnection took circa 2.3GW of the auction volume, all of which was from existing interconnectors with France, Netherlands and Ireland. The new NEMO interconnector with Belgium was unsuccessful, although it is not expected to be complete until the end of this decade.
A further auction is being held from 31st January to ensure security of supply over Winter 17/18.
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