Government to introduce 'carbon threshold' for Capacity Market
The Department for Business, Energy & Industrial Strategy (BEIS) has outlined reforms to the Capacity Market auction system which will enable demand-side response technologies to bid for 15-year contracts while adding a carbon emissions limit to spur an increase of low-carbon assets offered contracts.
BEIS has unveiled its long-awaited changes to the Capacity Market, the UK’s auction system that offers contracts to technologies designed to ensure stable and sufficient electricity generation during peak periods.
The Capacity Market has long been criticised for failing to offer demand-side response services more than a one-year contract in auctions while also receiving complaints about failing to consider and verify the carbon intensity of contracted technologies.
In response to an industry consultation, BEIS has now confirmed that demand-side response technologies will be able to bid for “all the agreement lengths available” in the Capacity Market, which reaches up to 15 years. This is subject to the bidder demonstrating that relevant capital expenditure thresholds can be met.
The Capacity Market will now be subjected to reporting and verification mechanisms that place a carbon emissions limit that will apply to all contracted technologies before July 2019. Additionally, an annual review will be conducted of new capacity technologies not eligible for the Market, but that could contribute to the security of supply. This comes as renewables made their first foray into the Capacity Market after a number of onshore wind projects prequalified for the November 2019 auctions.
Another change is that the minimum capacity threshold for competing technologies has been lowered from 2MW to 1MW.
Commenting on the changes, the REA’s chief executive Dr Nina Skorupska CBE noted that the Capacity Market is better positioned to embrace energy storage, which in turn will assist with the UK’s net-zero target.
“A common barrier to advancing the UK’s energy storage sector is that our electricity grids and major energy policies from Government are set up for an age of large-scale, centralised fossil power stations,” Skorupska said. “As clean energy technologies plunge in cost, and the climate crisis becomes ever-more urgent, it is crucial that the Capacity Market is designed in line with our decabonisation goals. The changes to the Capacity Market today will help make it easier for cutting-edge clean technologies to compete.
“In particular, we welcome the introduction of emission limits with mandatory reporting and verification. This should help push out some of the highest carbon-emitting plants and redirect funding to cleaner means of ensuring the security of supply. Reducing prequalification rules will also be helpful, as will allowing demand-response projects to bid for longer contract lengths. The reduced capacity thresholds will additionally ensure a greater number of smaller sites can participate.”
BEIS has also confirmed that it will accommodate temporary changes to the Capacity Market as a result of the coronavirus pandemic. For the current delivery year, providers can have deadlines extend to comply with the scheme and fees for those who didn’t comply, or complete testing requirements could be waived.