Government plans changes to capacity market rules for batteries and unproven DSR


Battery storage operators bidding into future capacity market auctions will have to carefully consider new derating factors proposed by government.

The department for business, energy and industrial strategy (Beis) has proposed rule changes to take into account batteries’ ability to provide power over several hours.

The consultation comes after concerns raised by Scottish Power in February around blanket derating factors applied to battery storage within the market rules.

Some 6% of the contracts (3.2GW) awarded in the December 16 T-4 auction for delivery from 2020 were awarded to storage providers, with around 500MW to new build battery storage projects.

The derating factor applied to all of those projects was 96%, the same as pumped hydro. Scottish Power, which owns pumped hydro assets, had argued that risked too much or too little capacity being procured and that batteries should be reassessed to determine an appropriate derating factor.

Beis agrees, stating the market was designed before batteries started to make a material impact in the sector, and plans to split batteries into categories based on duration of full power output. It said there would be transitional arrangements for the upcoming auctions.

DSR changes

Meanwhile, unproven DSR will have to complete tests earlier to avoid risk of last minute drop outs, according to Beis. Currently, tests must be completed the autumn prior to winter delivery. Under new rules, they will have to ready be a year ahead of time so that any capacity that does not materialise can be replaced in the T-1 year ahead auction.

The department said it had “no wish to cut across the commercial development of this important resource, but at the same time would like to see clearer, earlier evidence of the delivery progress of this capacity, so that it can make a robust assessment in time to replace any lost capacity at the point of the T-1 auctions”.

See the consultation here.

See the letter to stakeholders here.

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