Ofgem wants to simplify the Capacity Market rules to widen participation, reduce costs and promote secondary trading.
In a five-year review of the market, the regulator said it had provided security of supply, but was undermined by its complexity. Companies have on several occasions told New Power that they will not enter assets into the Capacity Market because the administrative burden and cost is too high. In the consultation document, Ofgem acknowledges that, “The complexity of the Rules and the regulatory burden they place on participants may be a barrier to participation and certainly makes participation complicated, which may in turn lead to inefficient bidding in the Auction.”
The regulator plans to improve secondary trading of capacity agreements and make it easier for successful bidders to switch configuration of units provided they still deliver the agreed amount of capacity. It also wants to alter its regulatory change process and review the ESO’s incentives around the market.
Ofgem’s review is running in parallel with a similar review by BEIS. The regulator also said the review was proceeding alongside a review by the European Commission on whether it passes State Aid tests.
The policy consultation closes on 28 May, see details here.
Register by 3 July to join an Ofgem stakeholder workshop on the five-year review on 10 July