Demand-side response will be able to bid for 15-year capacity market agreements under changes to government’s flagship policy intended to keep the lights on over winter and incentivise new build power stations.
Government agreed to make changes to the scheme after the European Commission was forced to undertake a formal investigation of the policy following a successful legal challenge by Tempus Energy that led to the capacity market being suspended.
Tempus, a demand-side response company, launched the challenge because founder Sara Bell argued it was anticompetitive to allow some technologies to bid for multi-year agreements, but DSR to only bid for one-year contracts.
The old Department for Energy and Climate Change, however, dismissed Bell’s arguments, with then energy minister Matt Hancock telling MPs in 2015 that Decc was “very confident” of winning the case and that the “[European] Commission is very confident that it is lawful.”
It wasn’t and the market was suspended, leaving those with a billion pounds worth of contracts in limbo and out of pocket.
The market was eventually reinstated following an investigation, with the Department for Business, Energy and Industrial Strategy (Beis) given a list of amendments to make by the Commission.
As a result, Beis now says DSR can bid for 15-year agreements, which many businesses with DSR assets will welcome.
However, providers will have to demonstrate they meet capital expenditure thresholds to justify those terms, which may mean few 15-year DSR agreements are awarded.
The consultation has also: halved the minimum threshold to 1MW; removed the block on those with long-term Stor contracts from participating; and confirmed plans to introduce a ‘reporting and verification mechanism for the introduction of CO2 emission limits’.
Beis said it is still concerned about potential fraud in the capacity market, but will not take action until “further investigation” has been undertaken.
Meanwhile, Beis has made “easements” to accommodate Covid-19 disruption. Among other allowances, it means for the current delivery year, providers whose payments are suspended because they couldn’t complete their testing requirements in time will get their money as and when they can complete performance tests.
See details of all the changes here.