Comment on Capacity Market Auction

Commenting on the results of the Capacity Market Auction, Dr Jonathan Marshall, energy analyst at the Energy and Climate Intelligence Unit (ECIU) said:

“The capacity auction clearing at £22.50 per kilowatt indicates that the market believes there is more than enough capacity in the system to keep the lights on, even on the coldest winter’s day. That’s why the price has settled too low to incentivise building of more than one new medium-sized CCGT gas plant, in contrast to ministers’ apparent wishes to have a whole batch coming through en route to their goal of 26GW new build by 2030. In fact, the perversity of running a technology-neutral capacity market is shown by the fact it has not incentivised a slew of new large gas plants while it is rewarding old coal plants for staying open until at least 2020.

“All of this indicates that if ministers really want to incentivise new gas build, they may need something different from the capacity market in its current form.

“Only considering peak load capacity, the current system is often skewed to less efficient technologies that are good for short runs over the winter, but not a sensible long-term plan for the electricity network. Making small changes in the system, mirroring policies in both the US and across Europe to prioritise low-carbon flexibility tools such as demand side response and storage could not only keep bills down, but would increase the ease of the ongoing transition to a low-carbon system with renewables at the core."