The Department for Energy Security and Net Zero (DESNZ) has opened its annual consultation into new generation technologies for participation in future Capacity Market auctions.
The current Capacity Market Rules require the Secretary of State to consult with energy market stakeholders by 1 October each year to determine if any new and upcoming energy generation technologies are capable of contributing to the security of the UK’s energy supply and, therefore, eligible for participation in upcoming Capacity Market Auctions. The consultation will remain open for submissions from industry stakeholders until 1 November, after which DESNZ will consult with the National Energy System Operator (NESO) to establish the value of the submitted technologies and their potential role in future capacity markets.
Submissions from last year’s consultation placed a significant focus on vehicle-to-everything (V2X) technology for its potential to boost energy security through demand reduction and grid balancing. However, the government acknowledged the difficulties in expanding the technology, and highlighted that it continues to support V2X technology through a £12.6 million funding commitment to the V2X Innovation Programme.
Offshore Hybrid Assets (OHAs), systems which combine point-to-point interconnectors with offshore wind generation, were also highlighted for their innovative energy security potential in the capacity market space following last year’s consultation, owing to their ability to both facilitate international power flows and renewable energy from offshore wind farms.
DESNZ states that it is currently reviewing evidence on smart transformers and hydrogen-to-power assets.
A big year for the capacity market
The capacity market has undergone reforms in recent months. A consultation on rule amendments to the capacity market led to the implementation of several proposed changes, including the rollover of a previous temporary amendment, which enables mothballed plans to prequalify for the capacity market auction, and a proposal supporting the participation of battery energy storage systems (BESS) in the capacity markets. To boost the ability of batteries to participate in the capacity market auction, the government has introduced a new definition of Permitted Battery Augmentation for BESS projects, allowing projects to add or replace battery units at an existing site in order to continue to meet capacity requirements.
These amendments received broad support, with over 70% of respondents supporting the changes.
In August, Ofgem released its annual report on the operation of the capacity market, which showed the 2023/24 T-4 auction received 810 prequalification applications, with a total de-rated capacity of 44.2GW.
