Figure 1: T-4 Demand and Possible Supply Range
Capacity Market Auction T4 Results
The T4 capacity market auction took place yesterday and resulted in the unexpectedly low clearing price of £8.40 per kW, per year for delivery in during 2021-22.
The result disappointed the majority of analysts coming in well below previous years that produced prices in excess of £20 per kW and follows last week’s T1 Auction that also cleared lower than predicted.
The T4 capacity market auction witnessed the acquisition of 50GW worth of contracts. Of the 74GW capacity entering the auction, 68% (50GW) received Capacity Agreements when the bidding came to an end in round 14.
The majority of agreements were secured by existing generators with gas plants gaining 29GW, nuclear agreeing 7.9GW and interconnectors securing 4.6GW. In what was similar to last years’ T4, some 1.2GW of Demand Side Response took agreements.
The capacity market was introduced to provide security of future supply and prevent blackouts. The scheme itself is designed to encourage investment in new capacity or for existing to remain in operation.
Any businesses with onsite generation capabilities are able to capitalise on the Capacity Market mechanism in an effort to increase revenue streams from available assets.
Full Breakdown as follows:
Source: EMR Delivery Body