Capacity Market: Rule changes for upcoming auctions

The latest round of Capacity Market auctions is underway following the publication of the auction parameters on 18 July, with the prequalification window subsequently opening on 26 July. In this blog, we explore some of the changes made to the rules and regulations of the scheme ahead of this year’s auctions.

Earlier this year, the government opened a consultation, Capacity Market 2023: strengthening security of supply and alignment with net zero, proposing short-term changes to predominantly increase delivery assurances and supply security, with longer-term changes more geared towards aligning the Capacity Market with net zero targets.

The proposals were split into two phases. Those in phase 1 intended to be implemented in time for the upcoming round of auctions, with those in phase 2 requiring further development and analysis before making a final decision on implementation.

The consultation ran between January and March 2023, with the government publishing its response to feedback in June 2023. Subsequently, in July 2023 amendments to the Capacity Market Rules and the Electricity Capacity Regulations were published to formalise the phase 1 changes. These changes included:

  • Removal of barriers to participation for mothballed plant
  • Connection Capacity reforms
  • Non-delivery penalty timeline
  • Fossil Fuel Emissions Declaration verification

We run through each of these changes and their implications in more detail in our Capacity Market forecast.

Conclusion

The majority of the changes made in phase 1 of this consultation are short-term, temporary changes intended to ensure security of supply at a time when electricity prices are high and some concerns over supply margins remain

The publication of the Prequalification Registers in November will give an initial idea as to whether these changes have had the intended effect, with the outcome of the auctions in February 2024 ultimately providing the answer. In addition, eyes will be on further feedback from the government, following the analysis and development of the phase 2 proposals with these intended to be longer-lasting changes to align the scheme with net zero.

Cornwall Insight’s Capacity Market Service contains forecasts of clearing prices and auction dynamics for the specific T-1 and T-4 Capacity Market auctions. Also included is a long-term forecast of future T-4 auctions out to 2050. For further information of the service, please contact Tom Ross at t.ross@cornwall-insight.com

Regulation and policy
Lee Drummee

Lee Drummee

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