The government has confirmed changes to the Capacity Market which are designed to remove barriers for demand side response (DSR) and energy storage, making it easier for clean technologies to compete.
The changes include reducing the Minimum Capacity Threshold from 2MW to 1MW, allowing smaller plays to participate.
DSR will now be able to apply to prequalify to bid for all the agreement lengths in the capacity market, provided they can demonstrate the relevant CAPEX threshold. These first two points will help ease the inclusion of storage in the Capacity Market.
It will now provide legislative underpinning for the long-standing 50% set-aside commitment for T1 auctions, along with methodology for working out the minimum amount of set-aside.
A formal, annual review of new capacity technologies that are not currently competing in the Capacity Market but which could help to provide security will be brought in.
Reporting and verification for the introduction of CO2 emission limits will also be brought in, with emissions limits set to apply to capacity which existed before 4 July 2019 from 1 October 2024.
“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,” explained Dr Nina Skorupska CBE, chief executive of the REA.
"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.”
She praised the changes, saying they will 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.”
The government’s decision follows a consultation it ran between 3 February and 2 March, during which it received 44 responses from stakeholders, including trade associations and capacity providers.
The government said that the proposed changes were “widely supported”, with the exception of the proposal to remove the exclusion of long term STOR (short term operating reserve) holders from competing in the Capacity Market. However, the government is still intended to remove this as there is no longer a sufficient risk of windfall profits, it explained.
Vijay Shinde, chair of the REA’s Energy Storage and Large Scale Power Forums and CTO of Harmony Energy added that the outcome was particularly “encouraging to the energy storage industry”.
“The changes will help progress a number of projects which in turn will assist in unlocking the vast potential of renewable power in the UK.
“Today’s positive announcement comes on the heels of the UK regulator last week approving changes ending ‘double charging’ of electricity storage. The current grid charging arrangements, which are distortive and leading to network costs being disproportionately recovered from electricity storage facilities, will thankfully end March 2021.
“With these regulatory changes happening, the UK storage industry is heading in the right direction.”