Evaluating the T-4 Capacity Market auction

On 6 March the EMR Delivery Body (National Grid ESO) published the provisional results of the T-4 Capacity Market (CM) auction for the delivery year 2023-24. The clearing price of the auction was £15.97/kW/year procuring 43,749MW of de-rated capacity.

Lee Drummee Analyst at Cornwall Insight takes a look at the results of the highest ever clearing price value since the 2016 auction.

“Successful capacity coming from existing generation accounted for 33,983MW or 77.7% of overall capacity. This was down on the T-3 auction which saw existing generation stand at 81.9% of total capacity. Only 4.0GW of nuclear was awarded agreements, also down from 5.9GW in the T-3 auction. Hunterston and Hinkley B had already opted out of the auction, while Heysham 1 and Hartlepool were unsuccessful in winning agreements.

“This allowed more space in the auction for new build sites. A total of 1,798MW of de-rated new build capacity were awarded agreements across 95 individual Capacity Market Units (CMUs). The Keadby 2 Combined Cycle Gas Turbine (CCGT) was the largest of these, with a de-rated capacity of 803.7MW. This represented the first new-build CCGT to win an agreement since the first T-4 auction in 2015.

“New build onshore wind was again successful, with three more projects awarded agreements. All successful plant will also benefit from a clearing price around 2.4 times higher than the T-3 auction.

“Only one windfarm did not win an agreement. However, with the potential re-integration of “Pot 1” technologies in the next Contracts for Difference allocation round, missing out on a CM agreement allows the project to participate in the next CfD round if they wish.”

About the Capacity Market Forecast

The Capacity Market Forecast report provides a view of the short and long-term auction prices. The report released to time with upcoming auctions gives an in-depth assessment of potential auction prices and dynamics. Utilising modelling from our long-term wholesale market model, it allows subscribers to understand the potential bidding behaviours and adapt their strategies in auctions.