A record 7.6GW of back up power has been secured in the latest year-ahead (T-1) Capacity Market auction for the winter of 2024/25.
The figure is slightly below the Electricity System Operator’s (ESO) headline procurement target of 7.7GW.
Nonetheless, it surpasses the previous record of 5.8GW which was secured in last year’s T-1 auction.
The exact amount of capacity procured in auctions is dependent on price, with slightly less being procured at higher prices.
The latest T-1 auction cleared at £35.79/kW/year – a 40% decrease when compared to the previous auction’s clearing price of £60/kW/year.
Existing generation was awarded the bulk of capacity contracts, with 6.2GW (81.3%) going to these types of generators. New build generation received just under 686MW (9%), while proven and unproven demand side response (DSR) received just over 745MW (9.7%).
The ESO clarified that the capacity figure for DSR units is bidding capacity, while for all other units it is de-rated capacity.
Of the fuel types of Capacity Market units that were awarded agreements, gas came out on top at over 2.9GW, while nuclear was awarded more than 2.7GW.
Commenting on the results Jake Thompson, data scientist at Montel EnAppSys, said: “Of the ~9.5GW of de-rated capacity that entered this year’s auction, ~7.6GW secured contracts against a target of ~7.7GW.
“In the first seven rounds less than 300MW of capacity exited. In the eighth round, however, the Sutton Bridge and Severn power stations, the two largest units in the auction, both exited, resulting in their collective ~1.5GW of capacity leaving the auction and causing it to clear.”
Meanwhile Sam Hollister, head of energy economics and finance at LCP Delta, said: “By this time next week, the UK government will have run two separate auctions for power generators, a move that we predict could cost UK billpayers over £3 billion to secure our electricity supplies.
“This week’s auction saw a procurement of £273m to ensure the lights stay on in 2025. Meanwhile we are expecting the T-4 auction, which runs next week and is targeting 44GW of generation in 2028, to reach prices in excess of last year’s recording breaking prices of £63/kW. The cost for this auction alone will be over £2.6billion.
“The biggest winners in this week’s auction were the large number of battery developers who will be able to supply power to the UK next year when the system is short. EDF also emerged as a winner, signing contracts on their nuclear plants with life extensions into 2025. These winners were boosted by an underestimate of demand as well as some planned assets coming on line date either being delayed or cancelled entirely.
“For next week’s T-4 auction, we will have to wait and see the outcome, but we anticipate an increasingly tight scenario as power stations retire and electricity demand increases.”