The Department for Business, Energy & Industrial Strategy has given the green light for more power to be procured in the Transitional Capacity Auction later this month.
Energy minister Jesse Norman has confirmed that up to 500MW of demand-side response (DSR) could secure contracts to help improve security of supply over next winter.
While the 300MW target for the auction remains unchanged, the minister has agreed a +/- 200MW tolerance, according to this letter to National Grid director, Cordi O’Hara.
The intent is to build some leeway into the target volume so that more power can be procured if the auction clears at or near the floor price, or less volume if the outturn is higher than anticipated.
The first of the transitional arrangement (TA) capacity auctions closed in January 2016 with 803MW in contracts awarded at a clearing price of £27.50 kW/year.
The TAs were originally developed to bring forward DSR in readiness for the main delivery years from October 2018 onwards, although the government subsequently decided to bring the capacity market forward a year.
The TAs now also specify that no generation can bid for contracts. Because the volume of ‘pure’ turn down DSR is an unknown quantity, the supply curve is hard to predict. Giving National Grid the leeway to procure more or less volume should reduce the chances of either a price crash, which would be harmful to the DSR sector, or an expensive bubble, which would be bad for bill payers.