Plant delays force increase in capacity auction targets

The government has been forced to increase the buying target for the main capacity market auction because several plants missed their delivery deadlines.

Energy secretary Amber Rudd said the target recommended by National Grid had failed to take full account of the delays.

The government will purchase 52GW of capacity in the four-year-ahead (T-4) auction for the winter of 2020/21, which is scheduled for December.

In a letter to National Grid, Rudd noted that three plants – Trafford, Cottam and West Burton – had failed to meet their capacity market milestones for delivery in 2020/21. She said the recommended target had only accounted for delays at two of the plants and not all three and the delay to the third plant would mean the absence of 5GW of capacity rather than just 3.4GW. 

Earlier this week develolper behind the Trafford combined cycle gas turbine plant (CCGT) – which is contracted to provide 1.6GW of capacity – was issued a termination notice after missing its ‘final commitment milestone’. It was later granted a three month extension. 

The government will buy 53.8GW of capacity in the year-ahead (T-1) auction for the winter of 2017/18 due to take place in January. 
The extra auction was introduced as a replacement for the Contingency Balancing Reserve (CBR), which is being ended a year early. 

It will also purchase 300MW of turn-down demand side response (DSR) in the Transitional Arrangements (TA) auction for the winter of 2017/18. This auction is due to be held in March.

Rudd said: “We are taking the action needed to tackle the legacy of under-investment in our energy infrastructure, build a system fit for the 21st century and ensure our country’s long-term energy security.”

“As part of this, the capacity market drives down costs and ensures we can meet our energy demand at the lowest possible price for bill payers.”

The capacity market was introduced to ensure the security of Britain’s supply by paying generators to keep plants up and running, regardless of whether they actually generate any power. The growth of renewables with low operating costs has made many conventional plants unprofitable without the subsidy.

The Renewable Energy Association has called for the capacity market to be reformed to enable renewables with storage to take part.

Senior policy analyst Frank Gordon said: “While the government has made positive noises regarding the sector, there have been missed opportunities for action, including by making some straightforward changes to the capacity market that would incentivise storage using an existing mechanism.”

“Storage developers need longer term contracts and clarity on how long capacity will be required for delivery, in order to size their projects appropriately.”