Capacity Market secures short-term supply at record low price

Capacity Market secures short-term supply at record low price

The fourth Capacity Market auction – held to secure generation capacity for winter 2017/18 – has cleared at 6.95/kW/Yr. The final sum was confirmed over the weekend. This price was the lowest of any previous capacity market auction and over £15 lower than the previous auction held last year (£22.50 per kW per year).

This price was the lowest of any previous capacity market auction and at least £12 lower than the previous auction held last year (£22.50 per kW per year).

Differing from previous auctions this one was only offering 1 year contracts and was only confirmed in March 2016. It was announced to address concerns over the tight supply margins for the upcoming winter, given the number of coal plant closures since the beginning of 2016.

The level of capacity secured by the auction for delivery in 2017/18 totalled 54.4 GW. This was an increase of over 5 GW from the first Capacity Market auction for 2018/19 delivery and 8 GW more than the 2015 auction for delivery in 2019/20.

In comparison to previous auctions there was a much lower amount of excess capacity available. Initially there was an excess of 6GW compared to 19GW from the 2020/21 auction held in December. This auction was only able to offer 1 year contracts, compared to 15 year contracts offered in the previous auction. As a result only established plant and those with a quick build time e.g. batteries could bid in, rather than new build developments or refurbishments.

Auction Delivery Year Capacity Clearing Price
T-4 December 2014 2018/19 49.26 GW £19.40 / kW / year
T-4 December 2015 2019/20 46.35 GW £18.00 / kW / year
T-4 December 2016 2020/21 52.42 GW £22.50 / kW / year
T-1 January 2017 2017/18  54.4 GW £6.95 / kW / year
T-4 December 2017 2021/22

The nature of the capacity that obtained a Capacity Market contract will be confirmed soon by the EMR delivery body.

Stay up to date with the Capacity Market auction and more

Our Market Intelligence Team is always on hand to make sure you are kept up to date with regulatory and policy announcements that could impact your business.

For more information about the Capacity Market, you can download our guide.

To get the latest energy market updates from our Market Intelligence team visit our blog or follow @UTWinsights.

Veronica Truman

Posted by on Friday, the 3. February at 13.18

Veronica Truman has been working in the energy industry since 2002 and currently manages the Market Intelligence, Analytics and Bureau Teams for Utilitywise. These teams are responsible for bespoke strategic consultancy projects for their clients, as well as delivering detailed analytics on clients’ consumption data. In addition to this, the Analytics team have developed models to forecast commodity and non-commodity charges out to 2040, and a market-leading Triad forecasting model.