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Capacity Market Auction For 2024/25

March 25, 2021

By Paul Homewood

 

 

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https://www.emrdeliverybody.com/CM/Auction-Results-1.aspx

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The latest capacity market for 2024/25 gives us a good insight into what grid capacity will look like in four years time when all the coal power stations will be gone.

This year’s auction has awarded contracts for 40.8GW of capacity, which is in addition to 6.7GW awarded 15 year contracts in earlier auctions. Most of the latter appears to be small scale diesel/gas engine generation and storage.

 

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Of the 26.4GW gas capacity, there is only 0.9GW of new build, consisting of three OCGT units being built by Drax in Bedfordshire, S Wales and Suffolk. There is also 0.7GW of refurbished capacity.

For some reason, 1.5GW of nuclear capacity at Torness and Dungeness exited the auction, unable to bid down. This may suggest concerns about their future. Both are due to close by 2030 anyway.

If we add in the new capacity due at Hinkley Point, we will have about 32GW of reliable capacity available late in the decade. Quite clearly this is woefully short of what is needed. We will obviously be desperately dependent on the interconnectors by then, but even these won’t be enough.

The small bits of storage and demand supply response are only useful for an hour or two at times of peak demand.

The only other capacity we will have to call on will be diesel and gas engines, but how reliable will they be? Even though they have 15-year contracts, how many will actually be operational in a few years time? Many of them appear to be owned by tin pot companies, no doubt out to make a quick buck. Indeed, a quick scan revealed two of these companies went bust in 2016, a year after winning contracts. One could easily see a situation where maintenance costs after a few years make them uneconomical, particularly if power prices stay low.

Engines are in any event designed to supply rapid and flexible response for short period, not for continuous baseload running.

17 Comments
  1. JimW permalink
    March 25, 2021 12:00 pm

    Time was that there were depts of government who made sure CEGB never could go below ceratin capacity numbers for national security reasons.
    Now there seems to be an acceptance that imports from countries the UK is doing its level best to piss off will always supply UK’s needs.
    It has as much credibility as the rest of the rubbish coming from a long line of governments of every hue.

  2. March 25, 2021 1:13 pm

    My view is that the state should own all generating capacity, in the same way that it owns tanks and warships. Private companies can compete for maintenance and operation, if one goes bust then another can take over, though probably at a higher cost.

    The apparent success of privatisation is an illusion created because private companies were handed existing generators for nothing.

    The notion of the system surviving Climate Hysteria by “pricing signals” is scary, the risk to private capital for anything other than wind/solar is too great, but not if the state pays upfront for the cost of construction of new generators.

  3. Cheshire Red permalink
    March 25, 2021 1:20 pm

    What are the options for legal action against the government, perhaps on grounds of energy negligence, breaching national security or national grid responsibilities, or similar?

    If you can demonstrate that governments own official projections / targets won’t be sufficient to meet current or expected demand, and that government KNOW it won’t, then is there an angle that can be pursued?

    I suggest this route because ALL main parties are operating a code of climate Omerta and they’ve proven themselves impervious to fair or reasonable requests for clarity or honesty.

    This is a serious issue. Maybe a potential government negligence case would focus minds a little?

    • Ray Sanders permalink
      March 25, 2021 1:36 pm

      Another option to focus minds is direct action, after all that is what “Green” pressure groups have been ding for years. It would be actually quite simple to collapse a large part of the grid by concerted group action of simultaneously switching on heavy load appliances. Most homes could easily add a 20kW load if they wanted to (electric instant showers are up 10.8kW on their own). You only have to work out the numbers to see that it would be quite possible for a sudden national load to exceed the grid’s Infrequent Infeed Loss Limit. The demand side increase would be the same effect as a sudden supply side loss beyond the system’s ability to handle. With so little spinning inertia in the system and huge amounts of embedded non- synchronous supply the system has become incredibly fragile.
      Demonstrating the problems would certainly focus a few minds. The real issue would be how to get enough people to take simultaneous (and perfectly legal) action – there are ways!
      .

      • Gerry, England permalink
        March 25, 2021 2:47 pm

        Actions speak louder than words and have more effect. I agree that there must be times when the grid is very fragile – strangely during the summer might be one of them when consumption is low and the percentage of unreliable generation in the grid is higher. Just like the grid failure in 2019 when they were pushing over 50% unreliables. I wonder what would have happened had the Texas grid gone down. Would they have learnt why?

  4. Joe Public permalink
    March 25, 2021 3:32 pm

    Interesting in the “Capacity Awarded by Primary Fuel Type” table is the row “Solar”???

    When scrolling down the list of winners (page 5 onwards) at the link below, we discover that most solar parks have associated battery storage (e.g. Clayhill), and Carlton Power Limited / Langage Solar Park Limited LAGGR1 lists Fuel type as “Gas”!

    Click to access Capacity%20Market%20Auction%20T4%20DY2024-25%20Final%20Report.pdf

    It’s evident that those who think batteries are the answer to closing dispatchable fossil fuel plants are in for a shock.

    Batteries won only 252MW of the 40.8GW awarded.

    Strangely, only facilities’ discharge capacity is mentioned, not storage capacity. Most will be fully depleted after one or two hours use.

    • March 25, 2021 4:09 pm

      The rules have been bent to allow batteries to compete, surely there should be a minimum duration for providing the capacity, such as 3 days, to cover a typical winter cold spell.

    • It doesn't add up... permalink
      March 26, 2021 11:00 am

      There are two main motivations for having batteries alongside larger solar parks. The first is that output can be extremely variable when clouds roll in, and with larger parks that can lead to local grid instability. Batteries can be used to smooth the output and reduce the ramp rates and other problems that rapid fluctuations can cause. These do not have to be all that large – a one hour battery is probably more than sufficient. They become essential quality improver installations, without which the farm might not be allowed to produce at all on days with highly variable output.

      The second use which is starting to creep in is at 4 hour duration, with some of the midday peak output being stored against redelivery in the peak demand hours after dusk. Optimising battery size for this has to recognise that in winter, peak output and indeed daily output will be low so too large a battery would be wasted. Any longer term storage remains uneconomic.

      Batteries earn most of their keep providing various grid stabilisation services. Being constrained to be fully charged to meet grid capacity problems locks them out of the lucrative balancing markets, so they are only likely to offer a small portion of capacity into the capacity market.

      The grid is no longer so concerned by peak demand, with the Triad system being abandoned from April. Peak transmission demand through bottlenecks is much more about surges in renewables output – midday solar peaks, and peak wind. If you provide for that, then you end up with spare transmission capacity to meet peak demand. It is assumed that interconnectors will solve the imbalances.

      https://theenergyst.com/peak-pique-ofgem-network-charging-changes-set-to-bite/

  5. March 25, 2021 4:27 pm

    4:30pm R4 Sciency show with Gaia Vince
    – UK is now halfway to meeting its target of “net-zero” with the guy from eco PR agency
    – hydrogen to replace fossil fuels (IMech boss & Cadent) *
    – Fagradalsfjall, Iceland’s active volcanic system

    • March 25, 2021 8:23 pm

      What a hoot, “halfway” assumes a linear decline, nothing in the real world declines like that, the gradient will decrease rapidly. Amusing that the expected exponential decline of covid cases is reported with shock and horror, that the decrease in cases is slowing.

  6. Curious George permalink
    March 25, 2021 6:35 pm

    How does this auction differ from the Texas ERCOT system?

    • It doesn't add up... permalink
      March 25, 2021 8:01 pm

      ERCOT doesn’t have any capacity auctions at all. However, generators have to reckon with the fact that wind will get priority and is subsidised. That has meant a large share of wind generation, and under investment in dispatchable generation, so there is no spare capacity during demand peaks.

    • Bill in Texas permalink
      March 25, 2021 8:58 pm

      ERCOT is an energy-only market; there is no capacity market in Texas. See https://www.forbes.com/sites/joshuarhodes/2020/09/25/even-renewables-are-bigger-in-texas/?sh=1ecd12a96a9a

      • March 25, 2021 9:16 pm

        Yes, that’s the whole problem.

        Here they have realised that you cannot rely on unreliable renewables. Thus you have to pay dispatchable generators to stand by just in case they are needed

  7. Gamecock permalink
    March 25, 2021 6:48 pm

    ‘The only other capacity we will have to call on will be diesel and gas engines, but how reliable will they be?’

    The ones in people’s yards will be very reliable.

    The shift is on, away from centrally produced electricity (with all of its efficiency and low emmissions), to private generation. The people will have their electricity. Government can only influence where they get it.

    • Jordan permalink
      March 25, 2021 8:36 pm

      “The ones in people’s yards will be very reliable.”
      Maybe, if done properly. But “properly” is extremely expensive to install, fuel and maintain.
      In practice “properly” would play second fiddle to “cheaply”. In built-up areas, cheapskate backup generators in the yard would create nuisance due to noise, sickly combustion fumes and blue smoke, and possible public safety risk. The bitter complaints would come quickly.
      Cheaply also means instances of cack-handed installation and poor maintenance. Not at all dependable or reliable. More like an increase in personal injury, occasional electrocution, fire, and electrical damage to connected appliances.
      Power isn’t cheap or easy.

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