Last week’s T-4 Capacity Market clearing price jumped to £15.97/kW/y, as over 100MW of storage was awarded contracts.
The clearing price is almost double that of the previous auction, which cleared at £8.50/kW/y, resulting in 117.0237MW of battery storage being awarded contracts.
Concerns have been raised over a recent string of low clearing prices, with the T-1 top up auction in June 2019 clearing at just £0.77/kW/y and last month’s T-1 auction remaining low at £1/kW/y.
The last T-4 auction to go ahead prior to the suspension and later reinstatement of the scheme cleared at £8.40/kW/y, which whilst above the figures seen in the most recent T-1s, was itself described as low at the time it cleared in February 2018.
The jump in price was welcomed by Madeleine Greenhalgh, policy lead for Regen, which administers the Electricity Storage Network, but the continued support for Combined Cycle Gas Turbines (CCGTs) and coal despite the new stringent emissions limit introduced last year was criticised. Greenhalgh pointed to the need for the Capacity Market to evolve alongside the net zero transition.
Greenhalgh also warned about the need for greater clarity on how the Capacity Market fits with other tools National Grid ESO uses.
"We know system stress events are changing and becoming more complex as the energy system evolves and there is a risk the Capacity Market becomes something of a Maginot Line, no longer defending against the speed and type of threats we face," Greenhalgh said.
Whilst this latest T-4 auction - for delivery 2023/24 – has cleared at a significantly higher £15.97/kW/y, the 205.6MW of unsuccessful battery storage in this round shows that clearing prices are still “too low to encourage significant new-build development”, according to Tom Edwards, senior modeller at Cornwall Insight.
Despite this, new builds did make up the majority of the 117.0237MW awarded to storage, accounting for thirteen of the sixteen successful assets.
This in contrast to last month’s T-3 auction, where only 3.578MW of battery storage won contracts, none of which was new build capacity, and the T-1 top up auction in June 2019 where only one new build was awarded capacity.
Of the new builds, Pivot Power secured contracts for two assets, with other successful projects including the Minety battery storage project, and assets owned by ScottishPower, Noriker, Keystone, GridReserve, Amber Energy Storage and Gresham House, operating under the HC ESS4-7 monikers.
Of the existing assets, Foresight’s Nevendon battery – which also secured a contract in the T-1 auction for 2020/21 period – was successful, as were assets owned by ESB Solar and Npower.
Battery storage saw a success rate of 36% in the auction, Edwards said, reflecting the higher clearing price.
However, it only made up 0.27% of the 43748.988 MW awarded across all asset classes in the 2023/24 T-4 auction.
CGGT picked up the largest quantity of contracts at 41.92% (18,341.537MW), followed by combined heat and power (CHP) with 10.25% (4,483.088MW).
Coal also picked up 1,320.975MW, despite the UK’s dwindling fleet and net zero target, accounting for 3.02% of contracts won.
Demand side response (DSR) picked up 2.68% of the capacity (1,167.694MW), with Enel X taking home the largest share (452.235MW).
Interestingly, Anesco and Eelpower’s names continue to appear in the DSR asset class, having seemingly sidestepped the derating factors attached to battery storage assets in 2018 in the latest T-1 and T-3 auctions by listing as DSR's.
In the 2023/24 T-4 auction, Anesco was awarded 65.554MW and Eelpower 31.934MW.
Ofgem told Current± last month that “more thought” is needed for how storage could participate in the DSR asset class.