The latest capacity market auction cleared at £22.50/kW, securing 52.4GW of winter power from 2020 at a total cost of £1.2bn. The outturn was higher than the two previous auctions, but much lower than predicted by most analysts. It failed to incentivise any new large gas plants, which makes it likely that government will introduce further changes to the policy in the coming months.
The majority of the contracts were secured by existing large generators: 22.6GW to combined cycle gas power stations; 7.9GW to nuclear power stations and 6.1GW to coal and biomass plant, representing around 70% of the total.
The auction did award contracts to Centrica’s 370MW combined cycle gas turbine (CCGT) at King’s Lynn and a 299MW open cycle gas turbine (OCGT) at InterGen’s Spalding site. Both were awarded 15-year deals.
However, these are relatively small plants in power station terms, and both are effectively extensions or rebuilds of existing plant.
Several large proposed CCGT projects dropped out as the clearing price fell below the level they require to invest. In all, almost 10GW of CCGTs exited the auction. Analysts have suggested up to double the latest outturn may be required to incentivise new large gas plant, although rising wholesale prices could alter those economics.
Storage and demand-side response were big winners in the auction. 1.4GW of DSR contracts represents a threefold increase on the previous auction. While some of the large utilities won DSR contracts, aggregators took the lion’s share. Enernoc secured around 500MW worth of contracts, Flexitricity took 370MW, Kiwi Power secured 232MW as well as a 15-year agreement for 5.8MW of battery storage, while SmartestEnergy landed around 90MW.
Storage took 3.2GW, around 6% of the total capacity contracts awarded. While the majority of those went to large pumped storage, more than 500MW of new battery storage projects were awarded contracts.
Some 4.4GW in contracts, representing 8% of the total were awarded to CHP and autogeneration operators.
679MW was awarded to diesel generators.
See the provisional auction outcome here.