UK auction fails to bring forward fresh large-scale power capacity

The UK government’s second capacity auction has failed to bring forward fresh large-scale generation capacity for use in 2019/2020, instead awarding the bulk of its support to existing generation and interconnectors.

The reverse auction began on Tuesday and cleared late on Thursday at £18.00 kW/year, below last year’s auction price and at a level too low to bring forward much-needed investment in new large-scale gas-fired capacity.

Just 2.4GW of successful capacity is from new or refurbishing generation, National Grid’s report shows. And the only “new” units larger than 30MW to succeed were SSE’s Ferrybridge multi-fuel plant which already secured a one year contract for 2018/19 through last year’s auction, and Carrington Power’s CCGT which has completed construction, started commissioning and is due to begin commercial operations in June next year.

The remaining new build plant fall below 30MW in size and are understood to include a significant proportion of gas- and diesel-fired generators, which critics argue undermines the government’s bid to decarbonise the energy sector.

As the auction price fell, eight proposed new CCGT plans totalling 5.3GW were for forced out by cheaper small-scale gas and diesel generating units and the UK’s existing power plants.

Auction administrator National Grid said that of the 57.7GW which entered the reverse auction 80.3 per cent received capacity agreements. Of the 46.3GW of successful capacity, 42GW is existing capacity and 1.8GW is existing interconnector capacity.

The government has already begun a consultation into how the auction is and said that in light of the first two year’s results it will check that the framework “still commands the confidence” of the industry “to deliver world class energy security and investment in new capacity”.

Prior to the auction critics warned that the low expected clearing price of the auction would needlessly reward existing power plant – which would have been available to the market even without a contract – and fail to bring forward investment in new, more efficient power capacity.

Earlier this year Carlton Power told the Telegraph that even though its Trafford gas-fired power plant was successful in the first capacity auction it has still not been able to secure the investment needed to drive the £800 million project forward, meaning it will not be available to supply power by its contracted 2018 start-date.

Last year the auction cleared after three days of steadily declining bids from participants, falling far below the £25-40/kW predicted by analysts to £19.40 per kilowatt per year to secure 49.3GW of power supply for 2018/19.