Huge interest in first ever energy capacity market auction

6 Oct 2014 11:23 AM

Over 500 separate applications received, ensuring a competitive auction and securing future electricity supplies at the lowest possible cost to billpayers. 

A huge number of applications have been received for involvement in the first ever Capacity Market auction in December this year, with the amount of generation capacity prequalifying already far in excess of the total amount the Government plans to procure.

A total of 513 separate applications were received for the first auction, equating to nearly 70GW of de-rated capacity. This will ensure the auction is competitive and will secure our electricity supplies in the years ahead at the lowest possible cost to billpayers.

Over 62GW have already been accepted by National Grid as eligible to participate, the equivalent of around 20 new nuclear power stations. A further 5GW was initially unsuccessful but it is expected that the majority of these will be able to prequalify successfully following the dispute resolution process.

Those successful at pre-qualification included approximately 9GW of new capacity. 7GW of this is made up of 8 potential new large gas power stations. Of these, over 5GW was from the independent sector.

Energy and Climate Change Secretary of State Edward Davey said:

“At the same time as we’re building a new generation of clean, homegrown electricity supplies, we have to deal with an energy crunch caused by a legacy of underinvestment.

“The high level of interest in the first ever Capacity Market auction – from large and small generators, and from both established and emerging players in the market - shows that we’ll be able to deliver the capacity we need, and get a good deal for billpayers in the process.”

Notes for Editors

• Of the 62.5GW that have been accepted by National Grid as eligible to participate, around 10GW have qualified on the condition they provide further documentation prior to bidding in the auction.

• The Government announced on 1st August 2014 that it will seek to procure 50.8GW in the first four-year ahead auction in December 2014. This figure is subject to change to reflect the fact that some plant have opted-out of the auction but will remain operational in the first delivery year of 2018/19. A decision will be made on this by mid-October and will be publicised via a letter to National Grid from the Secretary of State.

• A further auction will be held in late 2017. This is expected to contract a further 2.5GW of capacity. All capacity has to be available from October 2018 for one year. Further auctions will be held for future delivery years on a rolling basis.

• Those successful in the auctions will be required to provide capacity when the system needs it or face financial penalties. This will help ensure the lights stay on while also delivering value for money for bill payers.

• Of those successful at pre-qualification, 10GW is conditionally pre-qualified. This is typically new plant or otherwise unproven resources which will have to provide credit cover or collateral before the auction takes place.

• Previous announcements relating to the Capacity Market