The Government has three objectives for energy policy - to keep the lights on, to keep energy bills affordable, and to decarbonise energy generation. The Energy Bill, introduced to Parliament in November 2012, includes legislation to enable the market reforms that will deliver these three objectives.
A core element of Electricity Market Reform, the Capacity Market will incentivise sufficient reliable capacity (both supply and demand side) to ensure a secure electricity supply even at times of peak demand. Government will run the first Capacity Market auction in 2014 for delivery of capacity from the winter of 2018/19, subject to state aid clearance.
The Energy Bill includes legislation enabling the implementation of the Capacity Market. Alongside this, Government has been working with expert stakeholders to develop more detailed proposals for how the Capacity Market should work.
The Detailed Design Proposals document sets out how the Capacity Market enabled by the Energy Bill, will work in practice. It also outlines the rationale for some of the more significant design choices.
This Capacity Market Strawman provides an end-to-end description of the design of the Capacity Market proposed for introduction in Great Britain. It is a working document, which will be updated as the design progresses, and provides a technical description of how the mechanism might work in practice. The strawman does not discuss options or rationale. These, along with a higher level summary of the proposed design, can be found in the Detailed Design Proposals. The strawman is not a description of agreed Government policy and proposals may change before implementation. The next iteration will be published at the end of July 2013.