Friday 7 December 2018

Top-up capacity market auction planned for next summer

The government has said it intends to run a top-up auction under the Capacity Market (CM) scheme in summer 2019.

The announcement follows the suspension of the scheme by the European Court of Justice last month, which meant the UK cannot hold any auctions or provide any payments until it receives clearance.

Under the Capacity Market scheme, generators are offered financial incentives for ensuring power plants are kept on standby and are ready to provide emergency back-up electricity when demand is at its peak.

BEIS reiterated it is “working closely” with the European Commission on the necessary steps for the scheme to be investigated “as quickly as possible”.

It expects to hold the next auction for delivery in winter 2019/20, making any agreements conditional on the outcome of the Commission's formal investigation - the government will consult on the necessary regulatory changes to allow the possibility of the T-1 auction.

National Grid is continuing to operate the CM in the meantime, with the intention capacity providers may be eligible for deferred payments.

BEIS added in a statement: “The Court did not find the design of the GB CM to be incompatible with State Aid guidelines. As such, we are exploring together with the Commission the most rapid and effective path to conduct the formal investigation into the scheme in a way that meets all process requirements referred to in the judgment.

“The Commission envisages issuing an Opening Decision to open the formal investigation in early 2019. Subsequently, third parties will be able to submit comments on the decision.”