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Capacity Market Auction For 2017/18

February 7, 2017

By Paul Homewood




From PEI:


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.

Control room worker

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.

  1. February 7, 2017 2:02 pm

    This very low price was cited by a so-called “energy expert” on BBC R4 Moneybox a few days ago when they covered the Npower price rises, saying that the company can’t blame govt policy for its price rises because capacity payments are falling. On top of the notion that renewables can do no wrong (their complaints about reducing subsidies apparently being proof to this expert that their costs to consumers are falling), there is a massive leftie urge to blame the greed of private companies for price rises.

    It would be good to establish a breakdown of the many elements that go into an average electricity bill.

    • February 7, 2017 3:19 pm

      That comment about the reducing subsidies was deliberately misleading and disingenuous. Yes, subsidies (£/MWh) for new renewables are falling, but the overall subsidy (£billion/year) is rising each year as more subsidised renewable generators come on line to join those already being heavily subsidised.

  2. Mike Higton permalink
    February 7, 2017 2:42 pm

    The Peterhead plant is already partially mothballed, if memory serves, with only about 400 MW running. The rest was driven out of the market by the extortionate “access” prices consequent on wind getting priority on the grid.

    • Gerry, England permalink
      February 8, 2017 2:05 pm

      I had read that SSE were going to close it. Presumably mothball it as it is gas. Coal fired plants are bulldozed the day after closure aren’t they to ensure no reuse.

  3. Dung permalink
    February 7, 2017 3:22 pm

    How on Earth do they get this past the Climate Change Act anyway??
    Where in our constitution or in parliamentary laws do our government get authority fight globlal warming (by decarbonising our economy) all alone and with the rest of the planet finally seeing sense and goinmg for coal?

    • Athelstan permalink
      February 7, 2017 8:38 pm

      A very pertinent question methinks but one which only becomes an impossible imponderable, if, one first considers that the loons who think that they run the country are barely capable of running a tap, a political claque of halfwit managerialist ‘pass the parcel’ dobbers who possess the economic nous equal in exact measure: to the attention span of the proverbial gnat.

      These days ‘our’ Westminster (brain dead) body of politicians, their primary motive to being is, to fill their voluminous boots, peculation just a big BIG bonus…..the corporate green lobby anyone? Hey – eh Mr. Gummer? move over in the trough Johnny boy………

      Thus, all else is secondary to that MPs the executive’s self aggrandisement. Moreover, where the actual needs, views and wishes of the average Briton – you know the idiot who grafts, pays his taxes and upon which particularly pertaining to the SMEs [the only sector of the economy which keeps our heads above water – financially, employment and economically speaking]…….are, so far down the list as to be quite conveniently distant, so as to be illegible.

      Now of course, every post modern politician – in their Frankfurt School playbook, rule No. 1 is to find a cause and virtue signal to the heavens and not least……well raison d’etre ‘show you care more’ in the salons of the north London wankerati and in EU circles and beeb studios – “saving the planet”…………… it worked for a bit. Until the great British public began to finally wake up to smell the rotten carcass of the flaccid beast of ‘globull warbling’….its ever expanding costs of useless palliatives and by way of [see above] a bunch of numpties seeking to amend the dogs bollocks they’ve already caused to fashion. Aye re’fixing’ a market to harvest mass subsidy from the consumer and give away the profits to investors and investment banksters in; China, NYC, Denmark, Deutsche bank and just about any other corporate blood sucker you can care to mention.

      All of it, based on a demonstrably false premise, the great CHIMERA, Man Made emissions of a harmless trace gas = runaway globull warming and not least being peddled by a bunch of chalatans who shouldn’t be allowed near a chemistry set, let alone set loose into a University computer suite.

      It’s all gone FUBAR and as the law of unintended, unforeseen circumstances kicks in. And Oh! and btw! – the British people on matters #’green’ were asked never once and even still less voted for any of this political lunacy but stuck with it we are. I don’t know who…. you can blame; the EU, the bliar nutjob, Chris Huhne, the tories, the lavs and libs, tim dickhead clegg and whoever yellow, plus Maggie and Jim Hansen, et al. Yes, Britons we were railroaded and enforced and still they [in Westminster] persist!

      Drax is but one part of it. What is so frustrating, even now, in the realization of the horlicks they’ve administered to and on……………. nary a one of them seem any less inclined to utter any doubts.

      Godsakes, and at the risk of repeating myself, imho it would be a slam dunk as our ‘cousins’ are so fond of putting it, surely a vote winner if some brave soul, a politically courageous individual would raise his/her voice above the ritual alarmunist tumult and shout,

      “but see! look, the Emperor……………….the fekker has no clothes on!”

      Why did some hold out a hope and that, by some miracle Shereza May was going to turn out different? Forlorn dream gone and dim hopes dashed on the rocks of corporate/bankster self interest and focused on a politician who is ultimately incapable of making any sort of rational decision and still less could summon any courage, to stand out among the political sheep. Mz Dismay…………. and one who does not and never did have Britain’s interests at heart and first and foremost in her mind, no change there then.

  4. February 7, 2017 3:23 pm

    Don’t worry, Jeremy Corbyn has a cunning plan (I think it is the same cunning plan that Ed Millipede had). Under the cunning plan, electricity prices will not be allowed to increase to consumers, so no new power stations will be built, operable power stations will go bust and there will be no electricity available anyway.

    • February 7, 2017 7:49 pm

      But it will be the same misery for everyone – call it socialism 😉

    • Gerry, England permalink
      February 8, 2017 2:04 pm

      Diesel generator anyone?

  5. Svend Ferdinandsen permalink
    February 7, 2017 5:25 pm

    It had to end this way with a product that can not be stored. When one type of production is favoured with guaranted access to the market and incentives but not able to deliver on demand, then those who can and are needed must be kept alive no matter the cost.
    The incentives ripples down and are called new names to hide the obvious. The artificial market price is so low that everybody needs support. It is a farce, and not only in UK.
    The users pays it anyway, but the politicians meddling made it more expensive.

  6. February 7, 2017 7:52 pm

    ‘guarantee power companies extra payments for generating electricity when supplies are tight.’

    Since the power companies obviously ARE the suppliers, a cynic might say that was an incentive to ‘create’ just such a situation.

  7. Graeme No.3 permalink
    February 8, 2017 4:53 am

    Investment tip: DO NOT buy lunatics in the UK, especially those in parliament, there is an oversupply and you will certainly lose money.

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