The UK’s latest Capacity Market Auction will take place on Tuesday 31 January 2017, and bidding is expected to occur over the next four days. This week’s auction will be the UK’s first T-1 auction. It will attract bids from firms for subsidies covering the upcoming 2017/18 winter season.
Winning power stations will then be legally required to be available to generate as and when asked by National Grid. This ‘early’ auction was ordered by National Grid after it identified the need for additional supply next winter. Current forecasts for electricity supplies next winter season show tighter supply margins during November and December 2017 than those seen this year. Concerns over narrow and negative supply margins during September and October 2016 contributed to Day-ahead power prices spiking above £150/MWh. The system operator is hoping this additional one-year capacity auction will address concerns for the following year and avoid such extreme price movements.
Earlier instances of the Capacity Market Auction, the latest being held in December 2016, provide longer-term subsidy contracts. New build plant can qualify for 15-year contracts, while three-year agreements are awarded to plant seeking a refurbishment. These T-4 auctions are carried out four years ahead of the required delivery of generation. Three such auctions have already occurred, securing available generation capacity for 2018/19 to 2020/21. The cost of subsidy payments to generators are ultimately passed on to consumers.
These charges are expected to increase markedly from April this year. The cost to consumers will vary depending on their peak demand levels during the winter months.
How will the Capacity Market Auction impact you?
Utilitywise can help you manage and control your utility consumption and avoid the shock of increased charges. Our Market Intelligence team has launched a guide on the Capacity Market. This will provide you with all the details required to understand the process and how it affects you.
To find out more about the Capacity Market Auction, agreements, and warnings and how we can help you manage any increases to your energy bills, download our guide here.