Government wants views on how to bring unsubsidised renewables and hybrid projects into the Capacity Market (CM).
If workable solutions can be found, it aims to lay enabling legislation ahead of the auctions in winter 2019/20.
The department for business, energy and industrial strategy (Beis) said it thinks the CM is working broadly as intended, but seeks views on a wide range of potential amendments.
It wants to know whether contract lengths (one year for DSR, three years for refurbished generation plant and 15-years for new build) are suitable and whether existing penalty regimes for non-delivery are strong enough.
Credit cover for non-proven DSR is £5,000/MW, half that required for new build capacity. Some market participants suggest that gives DSR an advantage. Beis wants to know if that is the case, but points out that DSR can only get a one-year capacity agreement.
The implication is that it may offer longer agreements for DSR were it to increase credit cover requirements.
The department thinks steeper penalties might also sharpen signals for secondary trading.
Beis also seeks views on derating factors for different technologies – including DSR and interconnectors. Some market participants think new build interconnectors are at an advantage in the CM due to the cap and floor regime, which guarantees revenues.
It also wants to stop batteries pretending to be demand-side response in order to escape the storage derating factors applied ahead of last year’s auction.
Any thoughts on how overseas capacity could participate directly in the auctions are also sought.
As well, Beis would like views on whether there are too many cooks involved in overseeing and administrating the CM, and how risk of fraud can be reduced.
See the call for evidence here.