Government confirms capacity market review coming ‘later this year’

The government has confirmed plans to conduct a formal review of the capacity market “later this year”.

Energy and climate change minister Claire Perry made the announcement at an event in Oxford yesterday hosted by Aurora Energy Research.

Perry reportedly told delegates the government would examine “key questions” such the penalty regime, contract lengths and whether to allow renewables to participate in auctions as recommended by Aurora director Dieter Helm in his cost of energy review.

A spokesman for the Department for Business, Energy and Industrial Strategy said: “It’s only right that we should be considering the function of the capacity market.

“The whole point of the Dieter Helm review was to stimulate discussion among the sector and it’s been very effective in doing so, and we’re interested in all the ideas that are out there on how the market can evolve.”

Under the Energy Act 2013, the government is committed to reviewing the capacity market every five years.

Lawrence Slade, chief executive of trade body Energy UK, commented: “Renewables play an integral role in decarbonising our economy and reducing costs for consumers, which is why Energy UK has consistently called for renewables to be allowed to compete in capacity market auctions.

“We hope the forthcoming review will explore how innovative power products can effectively participate and deliver the needs of a future system, and welcome the opportunity for common-sense changes such as streamlining the rules and looking at ways to make the current penalty regime clearer and more consistent.

“We look forward to working with the government as it develops a strategy to ensure the capacity market provides security of supply and low carbon generation at the lowest cost to consumers.”

Analysis published by Aurora recently concluded that allowing subsidy-free renewables to bid into a reformed capacity market could cut energy bills by £600 million between 2025 and 2035.