T-4 capacity market clears at £8.40, lowest yet

capacity market agreements set between £5-£10/kW
Capacity Market agreements cleared at £8.40/kW

The capacity market auction for guaranteed power in four year’s time has cleared at £8.40/kW.

The result is significantly lower than the previous T-4 auctions, which ranged between £18 and £22.50/kW – and well below virtually all analyst forecasts.

Procurement of around 50GW was targeted, with 74GW of derated capacity, most of the UK’s generation fleet, plus interconnectors, bidding to secure agreements.

Existing large thermal plant took the lion’s share of agreements and many of those generators regard the CM as effectively a top-up payment, enabling them to accept low prices.

Large new build generators would require much higher rates, given the impact of renewable generation on their running hours and predictable revenues. That means government probably has to redesign the policy if it still wants to encourage investors to put their money into big gas power stations.

Last week the T-1 capacity market auction also cleared lower than the previous iteration, at £6/kW.

The EMR delivery body will publish the provisional results breaking down the auction by technology type at 7.30am Friday. See this link for details.

Story and headline were updated 7pm Thursday to reflect the actual clearing price of £8.40/kW from indicative range of £5-£10/kW.

Related stories:

Capacity market targets cut

Medium Combustion Plant Directive takes back-up generators out of DSR

Battery storage cut down to size as gigawatts qualify for capacity market

T-1 capacity market auction clears at £6/kW

Demand-side response auction clears at £45/kW

Shifting the balance of power: New, free demand-side response report

Half of small generators ‘could give up capacity market contracts’ after Triad cuts

Businesses ‘shutting down from 4-7pm due to peak power costs

Capacity market ‘buying the wrong stuff because it’s joined up with nothing’

Capacity market too low for large gas, but gigawatts of DSR, batteries and CHP win contracts

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