Capacity Market secures record year-ahead power

The latest year ahead Capacity Market auction has delivered a record amount of contracted back-up power.

The results of the T-1 capacity market auction for 2023-24, which concluded just before mid-day on Tuesday (14 February), show that 5.8GW of capacity has been secured in line with the target set by National Grid Electricity System Operator (ESO).

The clearance price of £60/kW was the second highest in a T-1 auction, which is designed to secure contracted capacity for the year ahead.

The only previous higher clearing price was last year’s figure of £75/kW.

The latest T-1 clearing price is nearly four times that paid for the same year’s T-4 auction in March 2020, which was £15.97/kW/year.

More existing capacity won contracts this year than in any previous T-1 auction.

Existing capacity made up the lion’s share of the capacity awarded contracts (80%) with new-build units (13%) and demand side response (7%) providing the balance.

The existing plants included the nuclear plants at Heysham and Hartlepool, the first ever to secure contracts through a T-1 auction.

This year’s auction has provided a stay of execution for SSE’s Medway and the Corby 1 large gas plants, which were previously at risk of being retired because they do not have contracts  beyond those gained in the latest auction, according to EnAppSys.

One coal unit, Uniper’s Ratcliffe-on-Soar 3, won a contract, while a record breaking 65MW of wind capacity secured T-1 contracts this year.

A total of 6.1GW of derated capacity entered the auction, of which only 341MW exited without a contract.

Gas made up nearly half (45%) of the capacity secured in the latest auction and nuclear almost a quarter (24%). Batteries were the third biggest source of capacity awarded contracts (10%).

Commenting on the auction results, EnAppSys director Phil Hewitt said: “ESO have procured more capacity than ever before in a T-1 auction and the result is a high clearing price, though the price is likely cheaper than that of the Winter Contingency contracts seen this winter.”

“The key beneficiaries of this auction are the larger units Medway and Corby that did not secure contracts in the prior T-4 auctions but are being kept online by the prices in this T-1. It demonstrates that, going forward, ESO is keen to reduce their reliance on interconnectors and become more confident in their ability to resolve supply issues domestically.”

“Another stand out is that a coal power station unit slated to close has now extended its life for another year showing that coal is not dead … yet”

“New build-battery units have also benefitted from the higher prices, with more than half of the new build capacity that was awarded contracts being from batteries. Many of these units will see their start dates brought forward in order to make the most of the high clearing price.”