The new UK capacity market, to be introduced later this year, has taken a further step towards becoming a reality with the announcement by Edward Davey, Secretary of State for Energy and Climate Change, that the government intends to procure 53.3 GW by auction for delivery in winter 2018/19. An auction for 50.8 GW will be held in December 2014, and an auction for the balance will be run in late 2017. Those successful in the auctions will be required to provide capacity when the system needs it or face financial penalties, helping "ensure the lights stay on while also delivering value for money for bill payers."
Procurement is the responsibility of National Grid, the EMR (Electricity Market Reform) Delivery Body. National Grid has published the Informal Auction Guidelines outlining the parameters for the 2014 auction and the EMR Electricity Capacity Report, which sets out the justification for the amount of capacity to be procured in the 2014 auction.
The government points out that 53.3 GW equates to more than 80% of peak electricity use in Great Britain today and the procurement "together with renewables and other generation will ensure we have enough power to meet the demands of homes and businesses in the future."
The government describes the auction as a "reintroduction" of a capacity market as it is "similar to arrangements used in the UK in the decade following electricity privatisation." The proposed arrangements are also said to be "standard practice in many US states and in some EU countries."
Edward Davey said: "There was a real risk back in 2010 that an energy crunch would hit Britain in the middle of this decade and lead to damaging power cuts" but now "we have the final piece of the jigsaw of our detailed energy security plans and can now say with confidence that we have defused the ticking time bomb of electricity supply risks we inherited."
The latest impact assessment shows suggests the new capacity market will lead to a £2 increase in the average annual domestic electricity bill over the period 2014 to 2030.
The capacity market proposal (which is secondary legislation associated with the already enacted 2013 Energy Bill) needs approval by the UK parliament and is subject to EC state aid approval.
One independent power plant developer to respond particularly positively to the auction announcement was Carlton Power, which said it was "now confident of securing investment" for its 2000 MW Trafford Power combined cycle plant and has informed the Department for Energy & Climate Change that it intends to bid the plant into the December 2014 auction.
Mike Benson, Business Development Director at Carlton Power said: "The capacity market is now ready to attract new independent generators and investors into the UK energy market and ensure we keep our lights on. It has been a long journey to get here but we thank DECC for its co-operation with the independent sector in devising a workable and bankable mechanism that means we can bring new sources of investment and expertise to ensuring the UK's security of supply."
According to Carlton, "The UK government recognises that it is vital for new gas fired power stations to be constructed to replace the 11 GW of coal fired power stations that are being forced to close by EU emissions regulations, as well as older and less efficient gas plants."
The company believes that "Trafford will be the first station in the UK specifically designed with the flexibility and fast start up times required to support the expanding intermittent renewable generation such as wind and solar."
The Trafford plant is to be constructed on land next to Carrington Power in Greater Manchester and was granted Section 36 Approval in April 2010 for a 1520 MW facility. In May 2014, Carlton wrote to Edward Davey requesting approval to vary its existing consent on the Trafford Project, "to accommodate recent advances in gas turbine technology and developments in the expected operating regime for the UK electricity market." Carlton wants to increase Trafford installed capacity to 2060 MW.
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