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This is the government response to the October 2016 consultation on the Capacity Market (“CM”). The consultation sought views on a number of essentially technical changes to the CM Rules and Regulations to simplify and improve certain areas, in light of learning from previous auctions.
The Capacity Market is designed to promote fair competition in order to discover the lowest sustainable price at which the necessary capacity can be brought forward to ensure security of electricity supply in Great Britain. In light of learning from previous auctions, we are proposing a number of essentially technical changes to the Capacity Market Rules and Regulations to simplify and improve certain areas.
One important proposed change would be to calculate the Capacity Market supplier charge - the method by which Capacity Market costs are recouped from suppliers - on the basis of gross rather than net demand. Many stakeholders have suggested that the current arrangements may favour small embedded generation, including diesel. The proposed change would remove a possible advantage, potentially affecting the bids of such embedded generators in the forthcoming auction(s). We are also seeking views on a number of other changes as set out in the consultation letter, the detailed proposals, and the indicative drafting.