Capacity Market Auction For 2017/18
By Paul Homewood
Gas and coal-fired power plants secured the lion’s share of contracts announced by National Grid on Friday.
£378m in contracts were awarded for the purpose of maintaining the UK’s electricity capacity. Gas-fired power stations secured the biggest share of contracts — almost 40 per cent —held by the UK electricity system operator, to ensure adequate supplies during the winter months when demand is highest.
Coal and biomass plants won a further 20 per cent of the contracts in the capacity market auction, which guarantee power companies extra payments for generating electricity when supplies are tight.
Contracts worth a combined capacity of over 209MW have been awarded to demand side response (DSR) technologies in the latest capacity market auction.
Scores of large and small generating companies took part in the auction, which started on Monday, and involved companies bidding for contracts which require them to have generating capacity available when needed by National Grid.
The auction is designed to minimise costs for consumers because the value of the contracts falls with each round of bidding as companies compete for the subsidies.
This week’s auction closed at a lower-than-expected price of £6.95 per kilowatt — less than half the level analysts had expected.
Meanwhile SSE said its Peterhead gas plant in Britain did not receive a capacity agreement in the auction and is, as a result now. ‘reviewing its options.
In total, the SSE received agreements for 840 MW of hydroelectric and pumped storage plant capacity and 3.6 GW of coal, gas-fired and embedded power generation capacity.
This is the Capacity Market auction for winter 2017/18, rushed through by the government when it realised too many old plants were shutting down.
Predictably the price came in very low, given that virtually of the contracts have gone to existing generators, for whom this is just a bonus. New build generation is listed at only 1734MW, but 797MW is actually coming from Carrington CCGT, which opened last year.
Nevertheless it is another £378 million that will be added to electricity bills next year.
Perhaps the most significant news is that SSE said it is considering the future of its Peterhead gas plant, after it failed to win a contract. The plant is rated at 1180MW.