The UK’s energy regulator, Ofgem, has opened a statutory consultation on several proposed changes to the Capacity Market rules.
Six changes to the current rules are being presented for stakeholder feedback; significantly, one of the suggested changes proposed removing the 50MW limit for individual capacity units to take part in the Capacity Market. The regulator notes that while the 50MW limit was initially introduced in order to prevent the aggregation of generating units on different sites as a single unit, the rule may in fact be “unnecessarily restricting” the ability of capacity providers to contribute to the market.
The proposed solution involves not only removing the 50MW limit on aggregate capacity for capacity market units but also adding a requirement for each capacity market unit to deliver over 50% of its individual capacity obligation on ‘satisfactory performance days’. Ofgem states that removing this 50MW limit is expected to increase flexibility and thus allow capacity providers to more easily meet their satisfactory performance days obligations.
While feedback is still being sought on all of Ofgem’s proposed changes, the consultation document notes that the regulator is “minded to approve” the removal of the 50MW limit.
Other proposed changes
Several other policy changes have been proposed as part of the consultation, including clarifying the role of agents in the capacity market system, changing the definition of station connection entry capacity and a number of small housekeeping changes to reflect the change from the Electricity System Operator to the National Energy System Operator (NESO) that took place on 1 October last year.
Additionally, Ofgem is suggesting that the rules around Capacity Market unit portfolios be changed to increase flexibility, by allowing Capacity Market units owned by separate companies under a single parent company to be combined in a single portfolio, allowing for the easier meeting of satisfactory performance day obligations.
Another rule up for consultation concerns the treatment of Capacity Market units that are late to connect to the grid. Current legislation notes that while capacity providers are not directly penalised for delays in connecting Capacity Market units to the grid, capacity agreements are not extended in the event of delays, meaning that overall effective length of the contract – and therefore capacity providers’ windows to earn money from assets – is shortened by connection delays.
The proposed change will provide delayed connection projects the option to postpone their financial commitment milestone requirements if the delay is the result of a failure to obtain a transmission licence or a distribution network operator is unable to provide an active connection point.
The consultation will remain open until 18 February, and Ofgem is seeking feedback from stakeholders, Capacity Market unit owners, and members of the public, noting that it believes “consultation is at the heart of good policy development”.
