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DSR performs strongly in first post-suspension Capacity Market pre-qualifications

Image: Getty.

Image: Getty.

Demand side response has witnessed strong growth in Capacity Market pre-qualification results for next year’s auctions, which have also recorded the first ever inclusion of a solar farm.

Late last week the Electricity Market Reform Delivery Body made public pre-qualification results for the forthcoming T-1, T-3 and T-4 auctions, detailing which projects have been cleared to compete for Capacity Market contracts in auctions taking place early next year.

And in all three auctions demand side response (DSR) technologies have pre-qualified in comparatively sizeable numbers, paving the way for the asset class to increase its share of the market.

In the T-1 top-up auction for the 2020/21 winter period, a total of 269 projects have been cleared to compete with a total de-rated capacity of 4.6GW. DSR – proven and unproven – has seen a total of 53 projects pre-qualified with a total de-rated capacity of around 1GW, nearly 25% of the total pre-qualified capacity.

DSR providers to have been pre-qualified for the T-1 auction include the likes of EDF, Limejump and Enel. However, battery storage assets have also been waved through to compete as providers of DSR, with the battery storage asset class itself limited to just 10 projects with a total de-rated capacity of 54MW.

Meanwhile, the T-3 auction has seen 741 projects with a total capacity of 58.4GW pre-qualified to compete. Of that capacity, around 2GW is DSR and 500MW is battery storage.

The T-3 auction, for the 2022-23 winter period, notably sees the inclusion of a solar farm for the first time in the Capacity Market. A prospective 50MW solar farm in North Anglesey has been pre-qualified, however its capacity has been de-rated to just 1.565MW given the steep de-rating attached to utility-scale PV, taking into account its comparative load factor to other asset classes.

The government cleared renewables to compete in future CM auctions in May this year following an industry consultation.

The T-4 auction, for the 2023-24 winter period, meanwhile, will see 747 projects totaling 62GW of capacity compete for contracts. Around 2.2GW of DSR de-rated capacity has been cleared to compete, compared to just 371MW of battery storage. A total of 39.5GW of de-rated gas-fired capacity has also been pre-qualified.

Notable for their inclusion in the T-3 and T-4 auctions are a number of coal assets, namely West Burton and Ratcliffe, just a few years before coal-firing plants will be phased out of the UK through tougher carbon prices.

The UK’s coal capacity has dwindled in recent years as the asset class has found it increasingly difficult to compete against cheaper, more prevalent renewables. As a result, a number of generation plants have closed ahead of schedule, with operators citing uneconomical market conditions.

The three auctions, which take place between January and March next year, are the first to be held after the mechanism was cleared to continue last month pending an investigation into its receipt of State Aid clearance from the European Commission.

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