The first Capacity Market auction is underway. The auction, which started at 09:00 today, is the next stage in the Government’s plan to ensure the lights stay on at the least cost – both now and in the future.
The aim of the Capacity Market is to make sure that there is enough capacity available to meet peak electricity demand in the future. The first stage of this process has been to estimate how much capacity will be needed in 2018/19, which is the first year the Capacity Market will be running. Electricity providers will then bid into this capacity auction, promising if they win a contract that they will be available to provide electricity when needed. In return, they receive a steady payment on top of the electricity that they sell.
National Grid is responsible for running today’s auction and is allocating 48.6GW of capacity. There has been a very high level of interest from large and small generators. Both established and emerging players in the market are bidding, representing over 64GW of capacity. This ensures that it will be a very competitive process and will help to keep costs down for bill payers.
Notes for editors:
The auction will start on Tuesday 16th December and there will be four auction rounds each day until the auction clears.
The Government is seeking to procure 48.6GW for delivery in 2018/19.
A further auction will be held in late 2017. This is expected to contract a further 2.5GW of capacity for delivery in 2018/19. All capacity has to be available from October 2018 for one year. Further auctions will be held for future delivery years on a rolling basis.
The auction will start with bidding at £70-75/kW.
The price will drop by £5 each round and the auction will finish when there are enough bids to meet the target capacity of 48.6 GW. This is the point at which the auction clears.
The latest the auction could finish is the last auction round on Friday 19th December.
There will be no announcements about the auction process until the auction clears.