National Grid Electricity System Operator (ESO) has issued its updated recommended procurement targets for the upcoming Capacity Market auctions. For all three auctions, the recommended capacity level was lower than the target previously confirmed by the Secretary of State (SoS).
A series of reports, published on 9 January, set out the ESO’s revised recommendations of capacity to be procured through the upcoming T-1, T-3 and T-4 auctions.
For the T-1 auction, the ESO recommended a revised procurement target of 0MW, down from the previous confirmed procurement target of 300MW. In its previous recommendation to government the ESO also recommended a target of 0MW. However, the SoS subsequently increased the target to 300MW to account both for non-delivery risks that they felt hadn’t been accounted for in the ESO’s modelling; and to meet the government’s commitment to set targets for T-1 auctions at a level at least half the original set-aside value.
The ESO’s report noted the outcome of its original Least Worst Regret calculation for the auction resulted in a target of -1,300MW. Since this analysis, 450MW of capacity has expressed its intention to remain open during the Delivery Year, but not compete for a Capacity Agreement.
This was not accounted for in the original modelling and so further lowered the amount of capacity that the ESO suggested needed to be procured, but as the level remained negative it was capped at 0MW.
In the updated Auction Guidelines document dated 9 January the target level of capacity remained 300MW.
For the T-3 auction the current confirmed target capacity is 44.2GW. In its updated recommendation the ESO suggested a slightly lower target of 44GW. Similarly, the recommendation for the T-4 auction was also reduced by 200MW, down from 43.5GW to 43.3GW.
In both cases the reduction was due to National Grid forecasting a combination of 100MW less autogeneration capacity operating outside of the Capacity Market and 300MW (rounded) of capacity that will hold long-term STOR contracts during the delivery year. These generators are not allowed to hold Capacity Agreements for the same delivery period.
Both of these targets have been reflected in the updated Auction Guideline report.
The effectiveness of running T-1 auctions for relatively low amounts of Capacity where prices may also be low will need revisiting. The reduction in capacity being targeted in the T-3 and T-4 auctions will make them more competitive but overall the change isn’t too material.
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