Two auctions are held to obtain capacity for each year of delivery. The first auction will take place four years before the delivery year in order to have sufficient time to develop the necessary new capabilities. One year before delivery, a “top-up” auction is held. This makes adjustments possible, as it is impossible to accurately predict peak demand four years in advance. The capacity market should ensure the availability of sufficient reliable capacity by providing payments to encourage investment in new capacity or to keep existing capacity open. The EMRS manages the payment mechanism. It may be that the only technology that can be considered “winner” in this auction is the connection where all interconnections close the auction and increase their total market share for the first time from 2.7 GW to 5.9 GW thanks to Eleclink, IFA2 and North Sea Link. However, the total devalued capacity of these units will decrease at the next auction, with the modeling method that defines these rating factors in the higher penetration of the connection and performance available in related countries. Looking to the future, there are also proposals to allow the foreign generation to participate directly in the auction, rather than attaching instructions that could change the role of interconnections in the CM. In the summer of 2019, the UK government will conduct an increased T-1 auction, which will be delivered in the winter of 2019/20, conditioning all agreements on the outcome of the Commission`s formal investigation. The UK government will soon discuss the regulatory changes needed to allow a T-1 auction. Amber Rudd`s letter on electricity market reform 2015.
Companies that successfully bid at an auction sign a capacity market agreement that commits to providing electricity or reducing electricity consumption if necessary. They regularly transmit data to prove that they are capable of doing so. In return, they receive a monthly payment set at the auction price. If they do not provide satisfactory data, their capacity agreements can be terminated. Compensation for market forecasts “more accurate than National Grid”: on November 15, 2018, payments under the Capacity Market Mechanism and future support to the capacity market were suspended. This is because the Tribunal issued its judgment Tempus Energy Ltd and Tempus Energy Technology Ltd/Commission (see LNB-News 15/11/2018 90) and quashed the Commission`s decision of 23 July 2014 finding that the system for supporting the construction of a capacity market in the United Kingdom was compatible with EU state aid rules. As it may take a few years to build some of the large power plants, the main auction still takes place four years before delivery. Up to 95% of the expected capacity is currently purchased. To ensure that the auction is not too large, the network manager provides estimates of peak demand and the additional capacity required. The government has published its response to the consultation on proposed technical changes to the capacity market and has adopted the necessary regulations in Parliament.
With only 156 MW of gas (mainly alternative piston engines), 26 MW of battery storage and 122 MW of waste for electricity, this year there were only small amounts of new construction that eliminated the auction. Onshore Wind participated for the first time in the cm auction with 14.5 MW hedging contracts – which, given the low rating factor, is slightly more than 177 MW of installed capacity.
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