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BEIS lowers target for next T-4 capacity market auction

The Department of Business Energy and Industrial Strategy will seek over 50GW of capacity in the next T-4 capacity market (CM) auction for delivery in 2021/22, around 2GW less than the proceeding auction after a technical panel of experts overrode the recommendations of National Grid.

Business secretary Greg Clark notified the director of the UK system operator at National Grid, Cordi O’Hara, this morning that the department would be seeking 50.1GW in the T-4 auction instead of the 50.5GW recommended.

However, Clark added that an additional 400MW would be set aside for the ‘associated’ T-1 auction which a spokesperson for BEIS confirmed would take place in the proceeding spring.

“The idea is to give an overview of what we're intending to buy and simply setting some aside will allow us to have a little flexibility going forward,” he said

The technical panel consulted by BEIS claimed its recommendation was based on its belief that National Grid had over-estimated the amount of capacity susceptible to non-delivery and that the system operator had not taken sufficient account of the demand-side response (DSR) to peak prices.

It added that DSR in the commercial and industrial sector would be enhanced over time by increased ‘smart response’ capability and higher cash-out prices in the balancing mechanism. The panel claims this should be therefore taken off the underlying demand projections, or treated as a form of non-CM capacity and be subtracted from the target capacity.

The 400MW capacity has therefore been deferred to the T-1 auction in 2020, by which time the panel says “key uncertainties around demand and non-delivery should be much clarified”.

Clark’s letter to O’Hara also established a 6GW target for the next T-1 auction for delivery in 2018/19, which has again been lowered from the 6.3GW recommendation from National Grid

Image: BEIS.

Image: BEIS.

The CM documents also set out the schedule for the next auctions, including the pre-qualification windows for both auctions set to open this month:

Image: BEIS.

Image: BEIS.