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.
Related articles:
Capacity market ‘will continue to incentivise engine farms without simple fix’
Capacity market clears at £6.95/kW
Grid procures 803MW of extra power in first transitional capacity auction
Scottish Power asks Ofgem to change classification of batteries in capacity market
Gateshead Council signs £1m demand response contract with Flexitricity
Capacity market too low for new gas but gigawatts of DSR, storage and CHP win contracts
Capacity breach: Public leisure facilities face closure due to energy policy costs
Firms ill prepared for ‘huge’ impact of capacity charge on billsÂ
National Grid issues first capacity market notice
Energy suppliers step up DSR aggregation efforts
Flexitricity launches footroom service
Flexitricity warns demand response cannot be rushed as winter looms
National Grid mulls rolling all frequency balancing services into one scheme
Follow us at @EnergystMedia. For regular bulletins, sign up for the free newsletter.
