Capacity Market entrants want Covid derogations extended, fearing contract terminations over build delays

Companies who have new-build Capacity Market contracts have pleaded with the Department for Business, Energy and Industrial Strategy (BEIS) to extend special Covid arrangements that delayed the required completion date for the new assets.

The companies said new plant that would be expected to have build times as short as six months before the pandemic had seen the start of work being delayed by a year or more. There were knock-on issues in the supply chain and in other parts of the process which meant catching up on one phase of the build would mean the project ran into another bottleneck.

Missing construction and operating deadlines can lead to Capacity Market contracts being cancelled, and although such contracts may well be reinstated after appeal companies said that represented a huge regulatory risk as well as being time consuming and raising costs.

The companies want a ‘long stop’ extension granted last year as part of Covid relief measures to be reinstated to give the CM parties at least a year of extension.

That discussion came as part of an online discussion led by BEIS on proposed changes to the Capacity Market – a consultation on the changes closes on Friday and BEIS urged stakeholders to respond.

Among the other issues under discussion was an expansion of secondary trading that would allow companies to trade away their obligation in the event the company was terminated. BEIS admitted that it had not previously considered the security of supply implications in an event such as the Calon Energy insolvency last year, which saw three large gas-fired plants close down.

There was immediate support for the measure – which industry members said had been put forward by industry during the Capacity Market design phase, but rejected by BEIS’s predecessor.

Among the most contentious proposals in the consultation is one to require Capacity Market Units to also become Balancing Market Units, so NGSO would have visibility of all assets. That was necessary so it would take the most efficient decisions and would not ‘over buy’ services because it did not have full information.

Companies in the meeting were concerned that as well as the headline cost of joining the BM there may be hidden costs such as new metering requirements, and for some the option of joining a ‘virtual lead party’ was not attractive.

The BMU requirement would apply from the 2023 prequalification round.  BEIS said its view was that units in receipt of CM revenues “should contribute to a secure and affordable energy system”. It would apply only to future contracts but it did not rule out expanding the requirements, because BEIS said it did not think it could change existing contracts, but said it was looking at that.

Further reading

Distributed generation forced to provide Balancing Market data to join Capacity Market in future – respond to consultation


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