‘Blind’ capacity auctions risk killing new technologies

Fears have been raised that “blind” over-procurement in capacity auctions could kill off new technologies such as demand-side response and battery storage.

Former MP and chief executive of Challenging Ideas, Laura Sandys, said decision makers must be “very careful” not to set procurement targets too high given the increasingly lack of visibility over the energy system.

“We are currently running a system under what I would call blind man’s bluff,” Sandys told delegates at the Utility Week Energy Summit in London.

“If you talk to people who are running the system… they would say they have less and less visibility of the system every single day.”

“We need to open the data. We need to deliver better price discovery through that open data. And we need to ensure that we are delivering the right asset at the right time”.

Sandys continued: “We must stop subsidising the slowest, the least innovative and the least productive. And we must also be very careful around the capacity market and us procuring too much generation because we are in the blind man’s bluff world.”

She said this would “kill” the market for balancing and ancillary services and the new technologies seeking to provide them.

National Grid is the delivery body for the capacity market and as such is responsible for recommending procurement targets for auctions to the business and energy secretary, Greg Clark, who then has the final say.

Back in February, Michael Grubb, the chair of the Panel of Technical Experts on Electricity Market Reform, penned a letter to Clark to highlight concerns over National Grid’s increasing difficulty in accurately forecasting demand.

According to reports in the Financial Times, Grubb wrote that the company lacked access to crucial data on the growing volume of the generation connected to distribution networks.

He said this “impedes the ability both of National Grid to make a comprehensive assessment of capacity needs, and our own ability to carry out our duties to scrutinise such analysis”.

Grubb said the company was hoping to receive the missing data shortly, but feared “it will not be in time for us to properly assess for this year’s capacity report”.

The information is already held by Electralink, which, among other things, operates the Data Transfer Service (DTS).

Earlier this year, the company submitted a proposal to the DTS user group on behalf of National Grid to allow it to gain access to the data.

The proposal was approved by the panel in April. Electralink says it will take effect within the next few weeks.

National Grid will still be left with limited visibility over the volume of behind-the-meter generation, which only shows up on the power grid as a reduction in demand.

However, the company said it has become adept at establishing the impact of behind-the-meter generation on demand and hence capacity requirements.