Capacity Market
The Capacity Market ensures security of electricity supply by providing a payment for reliable sources of capacity.
Part of the government’s Electricity Market Reform package, the Capacity Market will ensure security of electricity supply by providing a payment for reliable sources of capacity, alongside their electricity revenues, to ensure they deliver energy when needed. This will encourage the investment we need to replace older power stations and provide backup for more intermittent and inflexible low carbon generation sources.
The Capacity Market has also been designed to support the development of more active demand management in the electricity market.
23 January 2023: adjustments to the Capacity Market Auction parameters 2023 published
BEIS announced the final auction parameters for the upcoming Capacity Market auctions in February 2023, including the volume of capacity to be secured. The auctions are scheduled for:
- 14-15 February 2023: one-year ahead T-1 auction for the 2023 to 2024 Delivery Year
- 21-22 February 2023: 4-year ahead T-4 auction for the 2026 to 2027 Delivery Year
In July 2022, the Minister of State for Energy, Clean Growth and Climate Change wrote to National Grid ESO to announce the initial parameters for the 2 Capacity Market auctions in 2023.
6 December 2018: Capacity Market State Aid process
The UK government is working closely with the European Commission on the necessary steps for the GB Capacity Market (CM) scheme to be investigated as quickly as possible. This follows the judgment of the General Court of the Court of Justice of the European Union in Case T-793/14 and the standstill period it has imposed on the CM.
The Court did not find the design of the GB CM to be incompatible with State aid guidelines. As such, we are exploring together with the Commission the most rapid and effective path to conduct the formal investigation into the scheme in a way that meets all process requirements referred to in the judgment. The Commission envisages issuing an Opening Decision to open the formal investigation in early 2019. Subsequently, third parties will be able to submit comments on the decision.
It is one possible outcome of the investigation that the Commission reaches a positive decision after its investigation. This would mean that:
- aid granted under the GB CM before the judgment would be considered compatible with the internal market (such as capacity agreements arising from auctions held to date, and capacity payments in respect of those agreements)
- the results of all auctions to date would stand, and further auctions could be held
At the request of the UK government, National Grid and the Electricity Settlements Company are continuing to operate the Capacity Market scheme in the meantime, short of making payments, to ensure that capacity providers may be eligible for deferred payments after the standstill period (subject to State aid clearance). Additional actions will be taken to explore continuity in supplier charging arrangements.
We are working closely together with the Commission to ensure that the Commission has everything necessary to enable it to re-consider the case for approval of the CM scheme as quickly as possible.
The UK government will hold a T-1 top-up auction during summer 2019, for delivery in winter 2019/20, making any agreements conditional on the outcome of the Commission’s formal investigation. The UK government will shortly consult on necessary regulatory changes to allow for the possibility of a T-1 auction.
We will ensure that an appropriate process is followed in seeking the Commission’s State aid clearance for the GB CM scheme and that any mechanism to ensure security of supply in the UK is technology neutral and in line with the Guidelines on State aid for environmental protection and energy 2014-2020. We look forward to updating stakeholders on progress.
Capacity Market content and external links
This page contains all the general information on the Capacity Market including the Capacity Market Regulations and Rules. Specific information on the auctions can be found at:
- Transitional arrangements auction
- 2016 Capacity Market Auction
- 2015 Capacity Market Auction
- 2014 Capacity Market Auction
External links
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The Energy Act 2013 is the primary legislation that enables Electricity Market Reform, including the implementation of the Capacity Market. It received Royal Assent on 18 December 2013.
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Electricity Capacity Regulations (2014) together with the Capacity Market Rules, are the more detailed secondary legislation which establishes a Capacity Market.
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The Electricity Capacity (supplier payment etc.) regulations 2014 make provision about payments to be made by and to electricity suppliers in relation to the Capacity Market from 1st April 2015.
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The Electricity Capacity (Amending )Regulations 2015 amends the Electricity Capacity Regulations 2014 (S.I. 2014/2043) to enable electricity interconnectors to participate in the Capacity Market from 2015 onwards, and makes a number of minor and technical amendments to those Regulations; and amends the Electricity Capacity (Supplier Payment etc.) Regulations 2014 to set the settlement costs levy that funds the budget of the Capacity Market Settlement Body, as from 1st April 2015, and to correct a minor drafting error.
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The Electricity Capacity (Amendment) (no.2) Regulations 2015 amends the Electricity Capacity Regulations 2014 to substitute a new definition of “relevant grant” and to extend the number of days from 5 to 15 to permit applicants a longer period in which to submit credit cover after receiving a conditional prequalification notice.
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The Electricity Capacity (Amendment) Regulations 2016 amends the Electricity Capacity Regulations 2014 (S.I. 2014/2043) to establish an additional Capacity Market auction (the Supplementary Capacity Auction) for delivery in 2017/18; increase termination fees and credit cover payable under the Capacity Market scheme; make provision in relation to the transfer of Capacity Market obligations; and make a number of other amendments, including in relation to the second Capacity Market transitional auction; and make various minor amendments to the Electricity Capacity (Supplier Payment etc.) Regulations 2014 (S.I. 2014/3354).
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Letter for EMR Guidance for the Capacity Market Rules change process.
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Ofgem: Electricity Market Reform dispute resolution guidance
Capacity Market stakeholder events
Capacity Market Rules
The rules provide the detail for implementing the operating framework set out in regulations. This means that the rules focus on the technical and administrative rules and procedures for how the Capacity Market operates and includes matters such as procedures relating to the day-to-day running of the Capacity Market, the process by which capacity providers pre-qualify, and rules for running capacity auctions and issuing capacity agreements to successful bidders.
Implementing Electricity Market Reform (Chapter 3)
Implementing Electricity Market Reform provides stakeholders with a comprehensive overview of EMR policy. The document includes chapters on the two main mechanisms that the government is introducing to reform the electricity market: Contracts for Difference (CFDs) and the Capacity Market, as well as detail on measures to encourage greater energy efficiency through the Electricity Demand Reduction (EDR) programme.
Impact Assessment on the Capacity Market (June 2014)
The June 2014 impact assessment provides the rationale for why the government is intervening in the market and the costs and benefits of the intervention.
Final Capacity Market Design presentation
A brief outline of the reasons a Capacity Market was introduced, and summary of the final design for the Capacity Market.
Consultation and Amendments to Capacity Market Rules 2014
Consultation on proposed amendments to the Capacity Market Rules 2014 and explanation of some immediate amendments to the Capacity Market Rules 2014.
Reports and research
Setting Capacity Market parameters
Last updated 23 January 2023 + show all updates
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Link added to an open letter from BEIS to National Grid ESO on the Capacity Market 2023 auction parameters.
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Link to Government response to Capacity Market Technical Amendments consultation added.
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Capacity Market Technical Amendment consultation announced.
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Capacity Market State Aid Process statement published.
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Further information on the judgment 17 November 2018
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Government response to Tempus Energy Capacity Market State Aid Challenge published
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DECC, Ofgem, National Grid, ESC Event Capacity Market Stakeholder Workshop discussion summary
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Letter from Amber Rudd about the Electricity Market Reform capacity market auction 2015.
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Capacity Market - location of provisional results
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Update to the target capacity for the Capacity Market auction
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First published.