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Chart of the Week

2020

What might compete in upcoming Capacity Market auctions?

Lee Drummee Analyst

The next round of Capacity Market (CM) auctions are set to take place in March 2021, starting with the T-1 (Delivery Year 2021-22) on 2 March followed by the T-4 (Delivery Year 2024-25) on 9 March. The prequalification window for these auctions have been open since 20 July 2020 and will close on 11 September, with prequalification results scheduled to be published on 6 November. Multiple changes to CM rules as well as the underlying technology mix is set to alter competition levels in the auction. Amongst the changes are: a new minimum size of 1MW for all CMUs (previously 2MW), long-term STOR is now able to enter the auction, unproven DSR can get multi-year agreements for the first time, and new de-rating factors have been set for multiple technologies including battery and DSR units. As a result of these changes, the CM will potentially see higher levels of competition with a greater amount of capacity able to participate. In this Chart of the Week we examine the potential technology mix that could enter the T-4 auction in March 2021 and compare it to the previous T-4 auction. Our view of potential assets that could participate in the T-4 auction comprises assets that have participated in previous CM auctions (both successfully and unsuccessfully), excluding plant that already have active agreements for 2024-25, as well as new build assets that we expect will be able to commission in time for the Delivery Year. We see CCGT capacity representing 41.0% of potential 2024-25 participating capacity, compared to ...

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