The Government has today published the parameters for the next Capacity Market auction to ensure the UK has sufficient capacity to meet electricity demand for 2019/20.
The parameters outline the criteria for energy suppliers to apply and partake in the Government’s second capacity market auction, expected to take place in December 2015.
This year interconnectors are eligible to participate, increasing the competitive pressure on the auction clearing price and helping to ensure that security of supply is delivered at least cost to consumers.
Parameters for the Transitional Arrangements auction, for delivery of capacity in 2016/17, to encourage the growth of the Demand Side Response sector are also published.
Energy Minister Andrea Leadsom said:
“We have a plan to power the country so that British people and businesses can be confident that the lights will stay on, not just this winter but in the years and decades ahead, at the lowest possible cost to the hardworking people paying the bills.
“We’re building a new generation of clean, secure and affordable energy supplies, and are doing all that we can to help innovative technology to thrive.”
Using the tools provided by Government, National Grid has already announced the early procurement of additional reserve for this coming winter. This prudent step to ensure electricity supplies remain comfortable throughout winter ensured that bill payers benefited, with energy costing much less than last winter.
The Government today also published a Command Paper in response to the House of Lords Science and Technology Select Committee report into the resilience of the UK electricity system.
The report endorsed the Government’s decision to play a greater role in managing the electricity system through Electricity Market Reform, and concluded that the additional tools given to National Grid to procure reserve capacity ahead of the capacity market will ensure continued security of supply.
Notes to editors.
Energy suppliers who are successful in the auctions will be required to provide capacity when the system needs it or face financial penalties. This will help ensure the lights stay on while also delivering value for money for bill payers.
The Capacity Market is part of the UK Electricity Market and was introduced in 2014 to ensure that there is sufficient electricity generation capacity available at all times to meet projected levels of demand, from 2018/19.
Interconnectors link electricity transmission systems across borders, i.e. pipelines, so that cross-border trade in electricity can take place. Interconnection can lower bills, improve energy security and support the integration of renewable energy sources.
The Capacity Market Transitional Arrangements auction, for delivery of capacity in 2016/17 will take place for the first time in January 2016. This auction is ring-fenced for Demand Side-Response and small-scale flexible generation (sub 50MW).
The House of Lords published The resilience of the electricity system report on 12 March 2015.