Consultation outcome

Government response on new generating technologies for the future Capacity Market

Updated 30 November 2022

On 28 September 2022 we published our annual open letter inviting stakeholders to share their views by 1 November, as to whether any new generating technologies which can contribute to security of supply, and which are not already identified as a Generating Technology Class (GTC), should be eligible to participate in future Capacity Market (CM) auctions (‘the open letter’).

We received 7 responses from stakeholders to our open letter. We are thankful to stakeholders for providing such comprehensive responses to the open letter.

In the open letter we sought any updates on the progress of Vehicle-to-X (V2X, where X could represent the home, a building or the grid) technology over the past year and its potential to contribute to security of supply.

A number of respondents noted that the number of V2X projects had increased globally over the past year, particularly those which are operation commercially.

One response to the open letter referred to a CM Unit that is composed exclusively of directly controlled smart EV charging, which is participating in the Capacity Market this Delivery Year as demand side response. This response provided further details on the experience and challenges of participating in the CM with V2X technology.

Nevertheless, responses also noted that there have been barriers to further developing the technology into a viable commercial model, such as high equipment costs, difficulty entering highly regulated energy systems, and the small number of EVs available to consumers which are V2X enabled.

Two respondents encouraged the introduction of a separate GTC for electric vehicles, rather than relying on existing GTCs such as those for storage or demand side response. It was felt that a separate GTC, with specific rules and administrative processes that cater for V2X technology; as well as the introduction of appropriate de-rating factors, would ensure there are clear rules for determining and proving capacity.

The respondents pointed out that there are many factors across the electricity system that will need careful consideration to facilitate the participation of vehicle to grid technologies, such as half hourly market settlements and coordination between balancing services and Capacity Market participation.

One respondent proposed the inclusion of Multi-Purpose Interconnectors (MPIs) within the CM. MPIs, also known as hybrid interconnectors, combine a conventional interconnector (linking two countries) with connections to one or more offshore wind farms along its length. This response encouraged participation in the CM, subject to individual derating factors set utilising the existing interconnector derating methodology. It was noted that MPIs had not been commercially deployed in the UK, but sited projects in other countries such as Denmark and Germany.

We will continue to consider these emerging technologies with the ESO and how best to assess their potential contribution to security of supply and any future participation in the CM.

Another response provided details of a specific energy storage solution, which incorporates small scale pumped hydro-electric storage, and the role this technology could play in providing security of supply. Schedule 3 of the CM Rules describes the GTCs and defines storage as the “Conversion of imported electricity into a form of energy which can be stored, storing the energy which has been so converted and the re-conversion of the stored energy into electrical energy”. The government does not believe an additional GTC is needed, as the definition of storage is broad, inclusive of many technologies and derated by storage duration rather than technology type.

Finally, one response addressed Rule 4.4.4 of the CM Rules, in respect of site configuration for new build CM Units. The government is aware of issues stakeholders have raised regarding Rule 4.4.4 and welcomes the opportunity to work with industry and/or with the Capacity Market Advisory Group to consider solutions.

We will use this annual open letter process to continue our engagement with stakeholders on the progress of participation of new generating technologies.

Capacity Market Team, The Department for Business, Energy and Industrial Strategy