Gas and coal dominate Capacity Market Early Auction

The Early Auction for the Capacity Market for delivery in 2017/18 has cleared at £6.95 per kilowatt per year – by far the lowest price in any of the auctions so far.

The Early Auction was dominated by existing generation, the majority of which was coal and combined-cycle gas turbine (CCGT) plant.

Out of the 59.3GW of capacity which entered the auction, 54.4GW – or 92 per cent – won contracts. Of that, existing generation accounted for 50.1GW, new build generation 2.4GW and interconnectors 1.7GW.

CCGTs took the biggest slice of the pie, with 22GW winning contracts and just 1.5GW losing out. SSE said it is reviewing the future of its 1GW Peterhead plant after it failed to secure an agreement.

Coal and biomass plant won 10.4GW of contracts but lost out on a further 1.5GW. By the time the descending clock has cleared, Uskmouth (133MW), one of the four units at SSE’s Fiddler’s Ferry (423MW) and two of the four units at Uniper’s Ratcliffe-on-Soar (1GW) had all dropped out. Eggborough’s 1.8GW coal-fired plant, which was at one point scheduled to close in March last year, has once again gotten a reprieve after winning a contract for all four units.

Batteries and DSR failed to achieve the same level of success seen in the most recent four-year-ahead (T-4) auction in December. DSR won contracts totalling just 209MW as 583MW dropped out. Just over 10MW of battery storage secured agreements out of the nearly 64MW which entered.


Capacity which secured an agreement by technology type

Capacity which failed to secure an agreement by technology type

Source: National Grid


Responding to the results, business and energy minister Jesse Norman said: “Reliable power supplies are essential for businesses to thrive and succeed. Thanks to this auction, homes and businesses can have confidence in the availability of that electricity at the lowest possible cost. More widely, the composition of the UK's electricity supply is now clear beyond the end of this parliament.”

Open Energi commericial director Chris Kimmett commented: “Doom-mongers who predicted the lights would go out can sleep easy, while existing generators pocket some extra cash. The UK very evidently does not have a capacity issue.

“But as more variable renewables come on line, what it is facing is a flexibility issue. Our grid urgently needs to become more agile and the cleanest, cheapest, most efficient way of doing this is to make use of demand-side flexibility.

“The government’s recently announced funding for energy innovation projects is an encouraging step, but the priority should be market reform to ensure equal market access for demand-side providers and power generation.”


Volume of capacity which secured an agreement across all auctions so far

Source: National Grid


Note: All capacity figures quoted in this article are de-rated.

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