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BEIS opens Capacity Market consultation that could require units to enter Balancing Mechanism

Image: Getty.

Image: Getty.

All Capacity Market Units (CMU) may be required to be part of the Balancing Mechanism, according to a new consultation launched by the Department of Business, Energy and Industrial Strategy (BEIS).

The department has laid out 10 areas of incremental and technical improvements to the Capacity Market that it is looking for views on before the consultation closes on 16 April 2021.

First of these is the requirement for all CMUs to be registered as Balancing Mechanism Units as well, with this to improve National Grid ESO’s visibility of available assets. It would increase the operator's ability to manage the security of supply, allowing greater use and value from the flexibility of CMUs, BEIS suggested.

There will be a review of the existing COVID-19 easements, which were brought in in July 2020 to help manage any delays to the operator’s fulfilment of CM milestones. With the newest lockdown brought in in January 2021, views will be sought on whether additional easements are necessary.

BEIS will also consult on whether the net welfare algorithm for T-1 auctions – which requires it to only meet the 50% set aside commitment – should be changed. This falls under the Electricity Capacity Regulations 2014, and last July saw the target set at 0.4GW despite National Grid ESO recommending a target capacity of 0GW, as BEIS had to hit this 50%.

By altering this regulation, the costs to the consumer of the auction can be minimised argued BEIS.

Additionally, the department is looking to consult on changes to formulae used to determine Emissions Limits in the CM, adding clarifications to the legislation around this. To avoid units being rejected due to administrative or clerical errors, BEIS is seeking views on changes to give the CM Delivery Body greater flexibility to consider information.

It will look at extending the Extended Years Criteria so that it aligns with the requirement to provide Evidence of Total Project Spend, and prevents secondary trades from being rendered ineffective, making it easier to replace capacity that unexpectedly closes leading to the transferor’s Capacity Agreement being terminated.

Whether to maintain the minimum capacity threshold at 1MW will be consulted on, as will allowing refurbishing plants to have the same Long-Stop Date as new build plants and other minor corrections to the legislation.

The consultation comes after the results for the T-1 auction were released last week, clearing at a record high £45/kW/year due to tighter generation. The T-4 auction will take place this week.

For more information and to respond to the consultation, see here.

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