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Less burden, closer collaboration: Ofgem moves to simplify Capacity Market framework

Image: Ofgem.

Image: Ofgem.

Ofgem has unveiled a raft of proposed changes to the Capacity Market framework in a bid to simplify it in the short term.

Central to the changes is a purported need by the regulator to both reduce the burden on would-be participants in competing in the Capacity Market and to work closer with the likes of National Grid ESO, the Electricity Settlements Company and the industry moving forward.

However Ofgem has been forced to admit that the ongoing judicial cases surrounding the scheme has delayed the consultation as resources have had to be dedicated towards it.

A consultation launched by the industry regulator yesterday outlines a series of amendments which it said could both make it easier and less risky to bid in the process.

Some changes could even be in force by later this summer, paving the way for them to come into effect for next year’s auctions.

Among the changes are slight amendments to the pre-qualification process which would allow provides to hold back on submitting specific data until the agreement management process, which Ofgem believes would reduce the risk of some applicants being unnecessarily rejected at this stage.

Ofgem is also proposing to relax requirements for new build CMUs to supply independent technical expert reports ahead of the relevant delivery year.

Other changes include opening secondary trading markets from the T-4 Auction and reducing barriers to participation in secondary trading, designed to create a “more open and liquid” secondary market, and changes made to the rules regarding changes to aspects of CMU configuration between the auction and delivery years, aimed to increase rule clarity and reduce complexity.

The consultation is to close on 28 May 2019, and a review of the rules is intended to be published this summer. Some changes will be implemented at the date, while more detailed proposals may be required to inform other potential changes.

The consultations is the first of Ofgem’s policy work relating to the five year review of the Capacity Market rules, but happens to be occurring during a time of significant uncertainty surrounding the mechanism’s future, with a European Commission investigation ongoing into its State Aid approval.

Within the document, Ofgem has stressed that it has continued its review of the rules so as not to miss a statutory deadline of completing the five year review by August this year, but the regulator has been forced to admit that the consultation has been later than planned as a result of the decision having had “resource implications”.

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