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Elexon has proposed to significantly raise the credit assessment price (CAP) in a move which will see it top £300/MWh for the first time ever.
The code administrator said its Credit Committee met on Tuesday (30 November) to propose raising the CAP value by £75 to £305/MWh.
Last month Elexon adopted an alternative CAP review process, allowing the CAP to be adjusted faster in response to rapidly changing market conditions. It confirmed this latest consultation will utilise the new process.
If all respondents and Credit Committee members are in agreement, the proposed value will be implemented on 17 December, two weeks after the last notified CAP value of £230/MWh comes into effect.
Explaining its rationale, Elexon said the committee gave “greater weighting” in its consideration to the latest electricity price forecast for this month.
On the day of its meeting, average forecast market prices were at £305/MWh for December with latest peak prices at £350/MWh and latest base prices at £260/MWh. The committee said average forecast market prices for January have increased to £375/MWh.
The most recent system prices were also considered, with the committee highlighting high accepted offer prices in the Balancing Mechanism.
“Given the chance of colder weather and high prices in the Balancing Mechanism, the Credit Committee noted that there was likely to be system price spikes during the period when the proposed CAP would be live,” Elexon said.
The Credit Committee said it is prepared to increase the CAP again at its next meeting in two weeks’ time as prices going into January are currently forecast to be even higher.
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