Post: Capacity Market is key to energy security

Capacity Market is key to energy security

The Statutory Security of Supply Report 2024 has concluded that GB is expected to have sufficient supplies of electricity and gas to meet demand over the short and long-term.

The National Energy System Operator (NESO) has forecast sufficient electricity capacity to meet this winter’s demand, with a derated margin of 5.2GW (8.8%) of the average peak cold spell demand for this winter. This is an increase from the 4.4GW (7.4% of peak demand) last winter.  According to the report, published on 19 December, the Capacity Market (CM) is the key mechanism for ensuring there continues to be sufficient electricity capacity margin to meet peak demand. The required electricity capacity needed to ensure security of supply over the medium term has mostly been procured via four-year ahead auctions, with the remainder to be procured through auctions held in the year before delivery.

While most of this capacity comes from existing units, the CM has also procured new build units for delivery out to 2027-28.

The T-1 auction for the delivery year 2024-25 secured 7.6GW of de-rated capacity at a clearing price of £35.79/kW per year. A total of 9.5GW of derated capacity entered the auction, of which 80.8% received CM agreements. The T-4 auction for the delivery year 2027-28 secured 42.8GW of de-rated capacity at a clearing price of £65/kW per year. A total of 43.4GW of derated capacity entered the auction, of which 98.8% received CM agreements.

Providing pre-qualification services prior to the deadlines, enabling projects to meet project-specific milestones, and facilitating the bidding strategies across both the T-4 and T-1 Auction’s GridBeyond supported our clients to achieve 597MW of agreements covering between 1 and 15 years.

NESO has published the target capacity recommendations for the March 2025 CM auctions in its 2024 Electricity Capacity Report (ECR). For the T-1 Auction for the 2025-26 Delivery Year this was 6.8GW, to top up the 42.1GW already procured in the earlier T-4 auction. For the 2028-29 Delivery Year, NESO recommended a total target of 45.0GW.  The Secretary of State wrote to NESO on 18 July 2024 to set the CM auction targets. For the T-1 Auction, the target was set as 6.5GW. For the T-4 auction, the target was set as 44.0GW, with 1.0GW set aside for the future corresponding T-1 auction.

The next CM auctions will be held in March 2025. These will include a T-1 auction to top-up capacity for the 2025-26 Delivery Year and a T-4 auction to secure the bulk of the capacity for the 2028-29 Delivery Year. 

At GridBeyond we support businesses with an existing Capacity Market Agreements. Using data analysis and scheduling our technology can ensure satisfactory performance is demonstrated – throughout the lifetime of your agreement.

In addition, where circumstances are changed and sites cannot deliver on their obligation, GridBeyond’s Secondary Trading Clearing House allows users to buy and sell existing contracts with other qualified users to avoid a penalty under the mechanism rules. We provide options to support trading or re-allocation of volume where circumstances are changed and sites cannot deliver on their obligation.

Capacity Market Auctions 2024-Winners and losers

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