- Capacity Market auction secures over 52GW of electricity capacity for winter 2020/21
- New gas generation including two new power stations will be built to boost future energy security
- Low-carbon battery storage also wins agreements for the first time in the market wide auction
Homes and businesses in Britain have been given the certainty they need that their electricity demands will be met in the winter of 2020/21. By buying it four years in advance this also reduces the chances of unexpected electricity price spikes.
The capacity has been procured via the third annual four year ahead Capacity Market auction, the Government’s main tool for ensuring a continuous and reliable energy supply during times of high demand, such as cold winters.
The auction has brought forward a range of new generation, including new gas power stations in Kings Lynn and Spalding. Flexible, low-carbon battery storage has also won agreements for the first time in the market wide auction.
The auction cleared at a lower cost than most forecasts - £22.50 per kilowatt - ensuring a secure energy supply at a fair cost to bill payers. It has been estimated that the Capacity Market will have a net cost of around £2 per year on average for bill payers over the long-term.
Business and Energy Secretary Greg Clark said:
“Our homes and businesses need an electricity supply they can rely on all year round. We’ve provided them with that certainty, at a low cost to bill payers, years in advance.
“Technological innovation, as part of our low carbon future, will create jobs and opportunities across the UK. We are rebuilding an archaic energy system, bringing forward brand new gas power and innovative low-carbon capacity like battery storage to upgrade our energy mix.
“This is about more than just keeping the lights on. A modern, reliable, and flexible electricity system powers the economy and Britain’s future success.”
Other successful bidders include Demand Side Response, which was three times as successful as the previous auction, demonstrating a modern, flexible energy system. This includes when large electricity users agree to turn down their usage during times of peak demand. A variety of new small scale flexible gas generation has also been secured, while significantly less new diesel generation has won contracts compared to previous auctions.
Notes to Editors
Full details of the provisional results of the Capacity Market auction for 2020/21.
Government estimates made at the time the Capacity Market was introduced in 2014 suggest it will add only £2 net per year to a typical household energy bill on average over the long-term when reduced wholesale prices are taken into account. These reduced wholesale prices are caused by avoiding very high price spikes that would have occurred had the Capacity Market not been there.
Within two working days of the Capacity Market closing, the Auction Monitor must report to the Secretary of State on whether the procedures in the Rules and Action Guidelines have been properly followed.
The Secretary of State decides whether the auction results should stand based on the Auction Monitor’s report. Unless instructed otherwise by the Secretary of State, National Grid will then make public the Final Auction Results within eight working days of the Capacity Auction concluding.
National Grid will then issue capacity agreement notices to those awarded a Capacity agreement within 20 working days of the auction results day.