The T-4 Capacity Market auction has cleared in its 12th round today, with a price between £20 – £15/kW/year.
It had a target capacity of 40.1GW, with the potential clearing capacity at the 12th bidding round price floor hitting 41140.816MW.
The auction – which secured capacity for 2024/25 – was the first in which coal power plants were no longer able to participate due to the deadline for coal power retirement having been brought forward to 2024.
Additionally, the number of nuclear power plants set to close in coming years presented some uncertainty, with 3.5GW of de-rated capacity across four power stations expected not to take part.
“Despite there being lower nuclear and coal in this auction compared to the last auction, the same trends seem to be holding sway,” said Tom Edwards, senior modelling consultant at Cornwall Insight.
“The next Capacity Market auction for 2025-26 should be more interesting as we should be feeling the full effects from nuclear retirements and could expect to see new build setting the price higher than in previous auctions.”
The T-4 auction followed on from last week’s T-1 Capacity Market auction, which cleared at a record high of £45/kW/year due to tighter generation.
This had created some anticipation for similar trends in the T-4 auction said Alan Smallwood, Anesco optimisation director, but at £15-£20/kW/year – around the same level of last year’s auction which cleared at £15.97/kW/year – it remains “very much in line with previous auctions”.
“I do believe, however, that high prices are coming over the next few years and that batteries are going to be really important for the system moving forwards,” he added.
“For investors, we have seen what batteries have achieved to date in the ancillary services market and more recently in Dynamic Containment. We’ve also had glimpses of what they can do in the wholesale market too, with a few days of really exceptional returns. The Capacity Market really is just the cherry on top of the investment case. ”
