Government announces Capacity Market auction parameters

The Capacity Market is our main tool for ensuring that electricity remains available during times of high demand, such as dark winter evenings. It enables us to buy capacity in advance for use from 2017/18. It is the most cost effective way to guarantee that we have the full range of electricity infrastructure available to cope with unexpected peaks in demand.

Earlier this year, a package of reforms to the Capacity Market was confirmed, ensuring that it continues to deliver energy security for families and businesses.

This winter two Capacity Market auctions and the second Transitional Arrangements auction (which supports the Capacity Market) will take place, securing our electricity supply for the winters of 2020/21 and 2017/18. The auction parameters set out the amount of capacity we are looking to secure in these auctions.

Energy and Climate Change Secretary Amber Rudd said:

“We are taking the action needed to tackle the legacy of under-investment in our energy infrastructure, build a system fit for the 21st century and ensure our country’s long-term energy security.

“As part of this, the Capacity Market drives down costs and ensures we can meet our energy demand at the lowest possible price for bill payers.”

The Government intends to buy:

• 53.8GW in the early capacity auction for delivery in 2017/18
• 300MW of turn-down Demand Side Response in the Transitional Arrangements auction for delivery in 2017/18
• 52GW in the T-4 auction for delivery in 2020/21

Notes to editors

• The Capacity Market was introduced in 2014 to ensure that there is sufficient electricity capacity available at all times to meet projected levels of demand.
• Energy suppliers who are successful in the Capacity Market auctions will be required to provide capacity when the system needs it or face financial penalties. This will help to secure our energy supply while also delivering value for money for bill payers.
• Three Capacity Market auctions will take place this winter:
  1. The third T-4 auction, for the delivery year 2020/2021, will take place in December 2016.
  2. Earlier this year, the Government announced that it will hold an early auction for the delivery year 2017/2018. This auction is due to take place in January 2017.
  3. The second Capacity Market Transitional Arrangements auction, for delivery of capacity in 2017/18 will take place in March 2017. The auction is ring-fenced for turn-down Demand Side Response.