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Fresh details emerge surrounding summer Capacity Market top-up auction

Image: BEIS.

Image: BEIS.

The Department for Business, Energy and Industrial Strategy (BEIS) has issued more details surrounding its proposed T-1 top-up auction, but extended its window until the end of August “as a contingency measure”.

When the Capacity Market mechanism was suspended late last year, the government and National Grid was forced to abandon plans to hold the T-1 auction scheduled to take place in January, which would have ordinarily procured additional capacity.

At the time the government expressed its desire to hold a top-up auction this summer instead and, within a response to a broader consultation on the future of the Capacity Market, has confirmed how it expects such a top-up auction to be run.

The government has now confirmed the replacement T-1 auction is to be held simply by rearranging January’s auction which was essentially cancelled as a result of the mechanism’s suspension.

This top-up auction will retain the same auction design and process so as to keep it as consistent with a normal T-1 auction as possible and, as a result, all parties pre-qualified for that T-1 auction will be carried over to the summer’s top-up auction.

While BEIS said it understood the need to hold the top-up auction “as soon as possible”, there is a need to both avoid it clashing with the summer’s pre-qualification exercises for next year’s auction schedule and seal regulatory approval from both Houses of Parliament.

As a result, the auction window is to be extended until the end of August “as a contingency measure”, indicating that the top-up auction may not be held until such a date.

In addition, the government has stated that the auction is likely to be held at a time when the Capacity Market has yet to secure State aid approval, meaning that successful bidders will not be entitled to capacity payments until those approvals have been obtained.

BEIS expects State aid approval to be granted ahead of the 2019/20 delivery year and is to make provisions for back-payments to be made, enabling bidders to “have confidence in the revenues” they can expect to receive.

Applicants who successfully pre-qualified for the auction will be carried over into the top-up auction however, as the government has recognised that the delay may have impacted on the plans of some capacity providers, applicants will be able to withdraw from the process without penalty during a to-be-determined window by writing to the Delivery Body.

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