The target for the T-4 2025/26 Capacity Market auction is to remain broadly in line with its predecessors, while the T-1 2022/23 target has risen compared to 2021/22.
The Department for Business, Energy and Industrial Strategy (BEIS) is targeting a total capacity of 44.1GW for 2025/26, with 2GW of this set aside for the T-1 auction of that year, leaving a target of 42.1GW for the T-4 auction.
This is a slight increase on the 40.1GW targeted for T-4 2024/25, with the auction clearing at £18/kW/y. This was up on the £15.97/kW/y that the T-4 auction for 2023/24 cleared at, with this auction procuring 43.7GW.
For T-1 2022/23, BEIS is targeting 4.5GW, which is in line with recommendations from National Grid ESO’s 2021 Electricity Capacity Report. In a letter detailing the parameters, energy minister Anne-Marie Trevelyan thanked National Grid ESO for this report – released in May – and for the “robust analysis” by its teams.
Alongside this, advice from BEIS’ Panel of Technical Experts (PTE) was taken into account when setting the targets. The 4.5GW goal for T-1 2022/23 is a jump on the 2.4GW target for T-1 2021/22, which in turn was an updated target from the initial 0.4GW.
This was originally set as while National Grid ESO recommended a target of 0GW, BEIS has an obligation to hold an auction even when one isn’t required.
This target was then upgraded after National Grid ESO issued a document in January 2021 analysing the impact of COVID-19 on the 2020 Electricity Capacity Report recommendations.
It follows the role of the T-1 auctions being called into question due to a string of low clearing prices. Most recently, the T-1 2020/21 auction, which cleared at just £1.00/kW/y, with Cornwall Insight’s head of training, Ed Reed, saying that with “such a low price, it raises the question of whether running these T-1 auctions for relatively low capacity is beneficial”.
Prior to this, the 2019/20 T-1 auction cleared at just £0.77/kWh.
Last month, BEIS confirmed a series of Capacity Market improvements following a consultation with industry. These included extending the existing COVID-19 easements relating to the extended long-stop date and maintaining the minimum capacity threshold at 1MW.
However, the proposal to require all Capacity Market Units to also be registered as Balancing Mechanism Units has been placed on hold following feedback highlighting concerns over the implementation timeline. As such, BEIS is to continue to develop the proposal with stakeholders and act on the feedback it received.
The parameters for the T-1 2022/23 and T-4 2025/26 auctions may still be updated following prequalification, with the targets to be confirmed before the auctions are held in early 2022.