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BEIS backs down on requiring CMUs to be registered for the Balancing Mechanism

The consultation ran between March and April and proposed new requirements for Capacity Market Units. Image: BEIS.

The consultation ran between March and April and proposed new requirements for Capacity Market Units. Image: BEIS.

Capacity Market Units (CMUs) will not be required to be part of the Balancing Mechanism yet, following consultation feedback.

The consultation – run by the Department for Business, Energy and Industrial Strategy (BEIS) – explored a variety of improvements to the Capacity Market, one of which being a proposal to require all CMUs to also be registered as Balancing Mechanism Units.

However, responses to the consultation – of which there were 38 – highlighted concerns, in particular surrounding the proposed implementation timeline. As a result, BEIS has confirmed that it will continue to develop the proposal with stakeholders and act on the feedback it received.

Aside from this, however, the majority of its proposals are to go ahead, including extending the existing COVID-19 easements relating to the extended long-stop date, the extended deadlines for Metering and demand side response (DSR) Tests for DSR CMUs, and Independent Technical Expert certificates in relation to progress reports.

BEIS also intends to maintain the minimum capacity threshold at 1MW, which it said will ensure that the Capacity Market continues to be aligned with other markets and that the costs of administration are balanced with broad market access.

The department also outlined its plans to disable the net welfare algorithm for T-1 auctions that are held only to meet the 50% set-aside commitment, with this intended to minimise costs for consumers in the event an auction is held solely to meet BEIS’ requirement of auctioning at least 50% of the capacity set aside for the T-1 auction.

This requirement – which forms part of the Electricity Capacity Regulations 2014 – saw the target set at 0.4GW last July despite National Grid ESO recommending a target capacity of 0GW.

Additionally, BEIS is looking to give the Capacity Market Delivery Body greater flexibility to consider information, which corrects non-material errors in prequalification applications, helping to reduce the risk of prequalification applications being rejected due to minor, administrative errors.

It will also extend the deadline for meeting the Extended Years Criteria so that it aligns with the requirement to provide evidence of Total Project Spend, while making the sanction for breaching both - a reduction in agreement length - referable to the Secretary of State.

The government laid the draft Electricity Capacity (Amendment) Regulations 2021 in Parliament on Monday (21 June), and the draft regulations now has to be debated and approved by both Houses of Parliament before they can be made and come into force.

Meanwhile, the Capacity Market (Amendment) Rules 2021 are being prepared and will be laid in Parliament shortly, BEIS said.

The full consultation and planned measures can be read here.

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