The year-ahead (T-1) capacity auction for delivery next winter (2020/21) has cleared at a price of just £1/kW.
It is the second lowest price to date behind the delayed T-1 auction for the current winter, which cleared at £0.77/kW in June.
The auction was massively oversubscribed, with more than 3GW of de-rated capacity bidding against a target of just 300MW.
More than three times that amount – 1,024MW – was contracted, seemingly after the 820MW Nemo Link interconnector to Belgium emerged as the marginal unit in the merit order. A net welfare algorithm is used to determine whether to accept a marginal unit and exceed the target or reject the unit and fall below.
National Grid Electricity System Operator, the delivery body for the Capacity Market, recently called for the target to be set to zero.
New build generation – primarily gas reciprocating engines – accounted for around 75MW of contracted capacity, existing generation for 42MW and demand-side response for 86MW.
A four-year-ahead (T-4) auction for delivery starting in 2023/24 is scheduled for March.
The replacement for last year’s cancelled T-4 auction was held at the end of January and contracted 45GW of de-rated capacity at a price of £6.44/kW.
The winner’s included five onshore windfarms. This year’s auctions are the first in which intermittent renewables have been eligible to bid.
Capacity contracted across all auctions to date
Source: National Grid Electricity System Operator