Government plans to run a capacity market (CM) auction for delivery in 2022/23 early next year. It intends to allow renewables to bid for contracts and make changes to methodologies that govern de-rating factors for interconnectors.
All of which is subject to successfully re-instating the CM following its suspension by the European Commission, which upheld a legal challenge by Tempus Energy over the treatment of demand-side response. Beis said the Commission is likely to have made a decision by early next year. If that happens, the T-1 auction will take place a week after the T-3.
Agreements and credit cover
New build plants that pre-qualified for the postponed T-4 auction and hoped to get 15-year terms will only be able to bid for 1-year agreements in the T-3 if they have already commissioned. “Plant which has commissioned in the last year has demonstrated (by commissioning) that it does not need such an agreement in order to secure financing,” stated Beis.
The government will suspend credit cover requirements for the 2022/23 T-3 auction, the 2023/24 T-4 auction, and the 2020/21 T-1 auction during the standstill period. But credit cover will be required with 15 days of the standstill ending, said Beis, though DSR and interconnectors will get 40 days to pay.
Renewables and equivalent firm capacity
Renewable technologies will be allowed to bid for agreements on an ‘equivalent firm capacity’ basis – provided they do not receive subsidies such as the RO, Fit, CfD or other benefits which Beis said could constitute state aid. As such, those that use the Enterprise Investment Scheme or Venture Capital Trust set ups would have to declare it and see payments deducted from any CM agreements awarded.
Beis said it would seek to remove the ‘data floor’ used to determine detracting factors for interconnectors as leaving it in place “risks artificially constraining the final interconnector de-rating factors to a higher level than would be justified by the wider evidence”.