Capacity Market: BEIS consults on T-3 auction in 2020 and entry for renewables

BEIS is consulting further on changes to the Capacity Market that would enable wind and solar projects to be included, make changes in the way interconnectors participate, and prepare for a ‘T-3′ auction to be held in early 2020 – all assuming that the European Commission will grant State Aid approval for the market after its current re-assessment is complete.

The process for the T-3 auction – pre-qualification, appeals windows and the auction itself – would run alongside the ‘business as usual’ T-4 and T-1 auctions with BEIS aiming to run the T-3 first. 

BEIS says, “It was always anticipated that the CM framework would be amended to allow wind to participate at some point in the future. The first RO projects will begin to see their subsidy end in 2027 and the existing regulations are clear that they will be allowed to participate in the CM once their RO contracts expire” and 85% of responses to an earlier consultation supported this. But it believes CM revenues will be a very small proportion of their revenues – as low as 2% – because they will be derated so far on their anticipated contribution to security of supply (see table at bottom for initial estimates).

What is more, they may be derated further in future, as more projects reach the end of their Renewables Obligation or FIT subsidy periods. At that stage BEIS says it may consider the ‘fleet effect’ because weather-dependent technologies will all make their contribute to security at the same time. That may mean the costs and risk of participating in the market outweigh the potential revenue.

On interconnectors BEIS said it may remove a ‘floor’ in their derating factors based on historical data. It said there were a number of reasons why historical performance may no longer be a useful guide - ”the growing number of GB interconnectors connecting to the continent; the expected reduction in capacity margin across Europe due to mothballing and decommissioning of gas, coal and nuclear generation; and the increased demands on spare capacity abroad as capacity markets are established”. But it has asked the Capacity Market’s Panel of Technical Experts to look in more detail at how to manage derating factors for interconnectors.

BEIS is also looking at strengthening the CM penalty regime and streamlining secondary trading.

The consultation closes on 4 April, see full details here

 

 

Delivery Body de-rating factors, 8 January 2019 consultation

De-Rating Factors (%)

Base Cases

Onshore Wind

Offshore Wind

Solar PV

T-1 2020/21

8.98%

14.65%

1.17%

T-3 2022/23

8.40%

12.89%

1.76%

T-4 2023/24

8.20%

12.11%

1.56%

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