The Department for Energy Security and Net Zero (DESNZ) has opened dual consultations on changes to the Capacity Market (CM) rules.
DESNZ seeks views and evidence to aid its consideration of improvements for how consumer-led flexibility (synonymous with demand side response or demand side flexibility) is categorised and operates within the CM to ensure it reflects market conditions.
At the same time, it has called for responses on modernising the CM to better enable participation and delivery assurance of consumer-led flexibility. The government aims to implement its proposed changes before prequalification in 2025.
These latest proposals build on its response to the CM Phase 2 consultation and 2024 rule amendments to support auction liquidity that included the proposal to roll over a temporary amendment to enable mothballed plans to prequalify for the CM auction, and a proposal to support battery participation in the CM.
Among the proposed modernising changes, DESNZ has suggested that it will clarify the policy intent that Capacity Market Units (CMUs) cannot change their generating technology class after prequalification.
It also suggests that CMUs are able to change their opt-out status following a change in operational circumstances. This is intended to clarify policy intent that units that opt out of an upcoming T-4 auction because it will be retired in the auction’s delivery year could take part in future T-1 auctions if the CMU is able to keep running for longer than previously expected.
Improving CM participation for consumer-led flexibility
To some degree, improvements to the way that consumer-led flexibility services participate in the CM is part of its modernisation; demand side flexibility is increasingly favoured as a means of balancing the grid to enable increased renewable generation to come online.
The National Energy System Operator’s (NESO’s) new iteration of the Demand Flexibility Service (DFS) will be compatible with the CM and regional services offered by Distribution Network Operators (DNOs). NESO states that this will increase the number of options for participating in the flexibility market across the year, incentivising homes and businesses to get involved.
DESNZ is consulting on a CM change that would better facilitate applications from large aggregated domestic portfolios by allowing similar components to be collated into a single business model entry. Under current rules, a separate business model must be submitted for each component within a portfolio.
Within its call for evidence, the government is also seeking early views on demand side response generating technology classes: behind-the-meter storage, behind-the-meter generation and ‘genuine demand response’ (including turn-down). The latter relates to participation in flexibility services through upping (or decreasing) energy use when necessary to balance the grid.
DESNZ is also seeking views on whether an additional generating technology class should be added for EV charging and vehicle-to-grid (V2G) bidirectional charging technologies, if they were introduced into the CM, or whether they could be incorporated into the existing categories.
The call for evidence will be open until 17 February 2023, and the government aims to respond in spring 2025.
