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Interim energy and clean growth minister Chris Skidmore has confirmed the procurement targets for the capacity market auctions scheduled for 2020.
They include the replacement for the four-year-ahead (T-4) auction for delivery starting in 2022/23 which was due to take place in February but was cancelled following the suspension of the scheme.
Skidmore has set the procurement target for the now three-year-ahead (T-3) auction at 44.2GW. He agreed with the electricity system operator’s (ESO) recommended target volume of 45.4GW but opted to set aside 1.2GW to be acquired in future auctions.
The minister also agreed with the ESO’s recommended target volume of 44.7GW for the 2023/24 delivery year. He again decided to set aside 1.2GW, leaving 43.5GW to be procured in the corresponding T-4 auction.
However, in a letter to Duncan Burt, the director of operations at National Grid ESO, Skidmore noted that the target volume is 800MW higher than the recommendation of the Panel of Technical Experts (PTE) – the government’s independent advisory group.
According to the panel, its lower recommendation was intended to offset “a systematic demand over-forecasting bias of 0.8GW during recent years”. The panel also raised concerns over non-delivery by some contract holders, which it said may require the procurement of additional capacity.
In light of this divergence between the ESO and PTE, Skidmore requested that the two bodies work together in the coming months to resolve these issues.
Skidmore did not agree with the ESO’s recommended procurement target of nil for the year-ahead (T-1) auction for delivery in 2020/21, instead setting it at 300MW. The minister said the ESO had failed to properly account for non-delivery risks relating to plant outages and the suspension of the capacity market.
He additionally provided updated de-rating factors for interconnectors competing in the auctions. All of the de-rating factors for the T-3 auction are higher than for the T-4 auction it is replacing.
The European Commission is currently deciding whether to reapprove the capacity market under state rules after launching an in-depth investigation into scheme in February.
The capacity market was brought to a standstill in November after the European Court of Justice (ECJ) overturned the commission’s previous decision to approve the mechanism in 2014. The ruling was made in response to challenge lodged by Tempus Energy, which argued the capacity market discriminated against demand-side response providers, for example, due to the longer 15-year contracts available to new build generators.
The company filed another legal challenge in the High Court in March in an attempt to enforce the shutdown. It has accused the government of flouting the ECJ’s ruling by instructing capacity providers to continue complying with their agreements and encouraging energy suppliers to make voluntary capacity payments to the Electricity Settlements Company.
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