Government misses capacity auction target
19 Dec 2014
The UK’s first-ever Capacity Market auction concluded yesterday, securing less generating capacity than the government had originally planned.
When it first announced the auction earlier this year, the Department of Energy and Climate Change (DECC) had targeted procuring 50.8GW of electricity generating capacity in this week’s auction, for delivery in 2018/19.
However, National Grid, which ran the auction for the government, revised this target down to 48.6GW when it started the bidding process on Tuesday.
We are guaranteeing security at the lowest cost for consumers
Ed Davey MP
In the end, the total capacity procured through the auction came somewhere in between these two figures at 49.26GW.
Energy and Climate Change secretary Ed Davey claimed the auction was “fantastic news” for electricity consumers.
“We are guaranteeing security at the lowest cost for consumers,” said Davey.
“We’ve done this by ensuring that we get the best out of our existing power stations and unlocking new investment in flexible plant.”
Yesterday’s auction of generating capacity establishes the government’s planned capacity payment regime, aimed at encouraging investment in reserve electricity capacity capable of balancing the grid as more and more intermittent renewables such as wind farms come online.
Bidders in yesterday’s auction will be paid £19.40 for each kilowatt of capacity they make available for National Grid’s immediate use at times of peak demand or other occasions when the grid may need balancing.
The government intends to hold a further auction in 2017 for the remaining 2.5GW of capacity needed for 2018/19. This is expected to come largely from major energy users agreeing to reduce their usage at times of peak demand.
