National Grid ESO recently published its consultation* on the new de-rating factor methodology to be used for renewables participating in the Capacity Market (CM). The document forms a vital part of the five-year review of the Capacity Market.
The new proposal is to use an Equivalent Firm Capacity (EFC) approach. With the methodology based on the idea of the incremental marginal effect of an additional MW of wind or solar capacity on the security of supply. If this incremental method is adopted, it will mean that the de-rating factors for these renewable technologies will be based on the contribution of additional onshore and offshore wind or solar projects added to the system, not the contribution of the total fleets for these respective technologies.
As more wind and solar are added over time, then under this approach the de-rating factor would fall as a result of the diminishing effect of security of supply from adding more of the same technology.
Commenting on the proposal Gareth Miller, CEO of Cornwall Insight, said:
“While the recommendations in the consultation need to be finalised, it is good to get clarity on the approach as it allows the market to adjust expectations and plans accordingly and many projects will be following this consultation closely.
“It is probable that the de-ratings will be kept under continual consideration. Exploring whether a methodology would be needed to be adjusted for repowering or legacy schemes as material capacity volumes role out of subsidy and need to make investment decisions during the next decade.”
In the past, there has been no technology-specific de-rating factor for wind or solar, and the government has an express policy to facilitate renewable participation. So, this consultation is a welcome step in clarifying an element of how this will work. Despite this, gaps in the government’s decarbonisation policy remain.
Gareth Miller, CEO of Cornwall Insight, said:
“The broader challenge remains one for BEIS. National Grid’s role with the Capacity Market’s is not to stimulate the required volume of low carbon investment to meet government decarbonisation objectives. It is to achieve system security.
“The lack of stimulus for investment in subsidy-free or repowering undermines achieving decarbonisation objectives. It is not a challenge for achieving security of supply.
“So, the question for the government must be what new policy measures will provide that stimulus? This question needs to be answered by BEIS in the coming months to guard against progress against carbon budgets being unwound.”–Ends
Notes to Editors
* EMR Delivery Body Consultation – 7th January 2019
