In a new briefing published today, Frontier and Lane Clark & Peacock (LCP) assess the results of the fourth Capacity Market auction, that concluded on 8 February 2018.
The Capacity Market is a government policy designed to ensure that there is sufficient generation capacity to meet long-term electricity demand. All capacity providers (including new and existing power stations, storage, interconnectors and demand-side response) secure the right to receive capacity revenues by participating in a competitive auction which sets the level of capacity payments. Capacity auctions are held four years ahead of delivery (T-4), with a subsequent auction held one year ahead (T-1).
The T-4 capacity auction for 2021/22 cleared at a price of £8.40 per kW, which will be paid to all successful participants for providing available capacity in winter 2021/22. The clearing price observed in this auction was less than half the observed clearing price in any of the previous three T-4 auctions held to date. While the low clearing price is a good news for customers, it is likely to have implications for the supply mix for the GB system in the future.
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Frontier regularly advises public and private sector organisations on commercial due diligence of energy infrastructure assets, and on issues relating to security of supply and electricity market design across Europe.
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