Ofgem has made a decision to create a Capacity Market Advisory Group (CMAG) following an earlier Call for Input on the proposal.
The regulator said it expects that this CMAG will make the Capacity Market (CM) Rules change process more dynamic and adaptive to changing market conditions while also increasing transparency and promoting collaboration between parties impacted by the CM Rules.
The CM Rules provide detail for implementing much of the Capacity Market operating framework set out in the CM Regulations.
However, Ofgem said that the CM Rules and the annual change process have continued to increase in duration, complexity and difficulty of implementation.
It is therefore the regulator’s view that the current timescales for assessing a change proposal thoroughly, providing a subsequent decision and developing IT system changes to reflect the changes places significant burden and risk on CM participants, Delivery Partners and Ofgem itself.
Removing the annual requirement and giving industry a greater role in CM Rules change development will reduce this burden, with this enabled through the CMAG, which will ensure there is forum for industry to develop, scrutinise and prioritise proposals to improve the CM Rules.
It is to be a route to establish the industry’s priorities for CM Rules changes and to facilitate industry participants to collaborate to identify the most beneficial changes.
Ofgem is hoping to work collaboratively with CMAG and industry going forward in order to establish these priorities and to effectively deliver CM Rules changes that have a positive effect on the operation of the Capacity Market and are beneficial to consumers and security of supply.
It will still maintain full decision-making responsibility for any CM Rules changes considered by the CMAG, however.
The three CMAG objectives will be to ensure CM Rule changes submitted to Ofgem via CMAG further Ofgem’s principal objective, present recommendations in a clear, robust and well evidenced manner and the CMAG operates and is administered in an efficient, impartial and transparent manner.
An annual review of the group’s performance against the CMAG objectives is to be conducted by Ofgem, with the regulator to seek to amend the arrangements if it considers that CMAG is not functioning effectively.
Elexon is to fulfil the CMAG secretariat role, with this decision taken by Ofgem due to Elexon’s expertise and the role being a strong fit with Elexon’s existing objectives under its code administrator role.
A modification to the Balancing and Settlement Code (BSC) is required to permit Elexon to take on the secretariat role and to ensure secretariat costs are appropriately recovered, with the CMAG’s first meetings to take place once this modification is made.
This is expected to be by September/October 2022.
The creation of the CMAG follows the Department for Business, Energy and Industrial Strategy (BEIS) issuing a Call for Evidence last year on the CM looking at early actions to align it to net zero as well as a longer-term review.
Specifically, BEIS was looking for views on the CM's performance since its implementation as well as views on the CM as a continuing mechanism to address system adequacy among other topics.