Beis is opening a debate on the future of the Capacity Market, inviting views on its early alignment with Net Zero, and more fundamentally its long-term relevance.
Maintaining security of supply over ageing networks carrying vastly increased volumes of renewables, plus the role of interconnectors in a post-Brexit market, are among challenges identified in the consultation.
Dominating the debate officials seek to stimulate, will be fundamental questions related to whether Whitehall and Ofgem need to step in to guarantee continuity of supply.
Recent clearing prices in T-1 auctions as low as £1.00 per kW/year have raised questions among participants about the worth of running auctions to secure relatively modest capacities.
Connecting new wind and solar capacity is another issue to be explored.
Previous discussions led by Ofgem, have led to fear that allowing Capacity Market Units (CMUs) to declare their own connection needs gives a perverse incentive, encouraging participants may over-state their connection capacity needed, so as to work around the dictates of de-rating.
On specifics, Beis is believed to be pondering curbs on bidders’ access to the CM’s longest multi-year agreements for ‘low carbon’ capacity. It also must resolve accounting for ‘lower’ rather than ‘low’ carbon capacity, when determining eligibility to bid on long commitments.
Also to be queried are the benefits and challenges of linking future long-term deals with a new limit on carbon emissions.
Connecting new wind and solar capacity is another issue to be explored. Previous discussions led by Ofgem have led to fears that allowing Capacity Market Units (CMUs) to declare their own connection needs gives a perverse incentive, encouraging participants to over-state their connection capacity needed, so as to work around de-rating requirements.
The regulator’s thinking looks likely to require CMUs to output at above 97% of their connection capacity on three distinct occasions during a commitment; unlikely for wind and solar, it believes.
Alternative arrangements must be found for these technologies, Beis believes. Ascertaining participants’ views on what percentage of connection capacity wind and solar might be expected to meet three times a year is one route out of the dilemma.
Beis frames its desired debate around 33 questions, outlined here. Participants’ responses are requested by 18 October.