T-4 Capacity Market auction clears at £8.40

The T-4 Capacity Market auction for 2021/22 has cleared at £8.40, the lowest figure yet. Some 74GW entered the bidding to provide 50.5GW in the delivery year.

In total 439 capacity market units will be awarded Capacity Agreements, from 129 companies. The auction brought forward just 762MW of new-build generation, provided by 67 new plants, and  over 2GW from three new-build interconnectors.

Proven demand side response (DSR) will provide 46MW and unproven DSR 1160MW.

The auction results were seen by the industry as a decisive shift that saw capacity lose its value in favour of flexibility.

Michael Phelan, chief executive at Endeco Technologies (soon to become Gridbeyond), said “The market is increasingly valuing flexibility, rather than capacity. The ability to swiftly adjust and accurately control consumption, rather than the blunt delivery of power onto the system with lots of advanced notice, is of greater significance.”

“The value being so close to that of last week’s T-1 indicates that the market is flooded with available capacity. The types of capacity will drive the next challenge that National Grid faces. With the proliferation of renewables, the issues now revolve around how firm the generation is and how to counter that with flexibility, rather than the amount of available power.”

Paul Glendinning, head of networks at WSP, said: “The UK energy market has now reached a tipping point. We have seen a step-change in the way our energy will be provided in the future, with a move away from large traditional, generating stations and high voltage transmission to a smarter, more inter-connected system, with a focus on demand side management and localised energy trading.

“The energy market is going through a period of almost unprecedented change, with disruptors, often from other sectors and industries, changing the way the system operates and the market delivers energy to consumers. We are at the beginning of a transition to a new inter-connected, smart, decarbonised system that uses big data to control and deliver energy at a local level.”


Capacity by technology

Lawrence Slade, chief executive at lobby group EnergyUK, said “This Capacity Market auction clearing low once again proves that competition is successful at providing security of supply at the lowest cost to consumers. This auction along with those preceding it have supported innovative, emerging technologies whilst ensuring we get the best value from existing assets. We will continue to work with government as the Capacity Market evolves, including the possible inclusion of renewables in future auctions, and in the forthcoming review of Electricity Market Reform.”

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