On 12 June the EMR Delivery Body announced that the T-1 Capacity Market auction for delivery year 2019-20 cleared at £0.77/kW – the lowest clearing price ever to be achieved in a GB capacity auction. In this week’s Energy Perspective, we pick apart the reasons behind the clearing price falling so low. We suggest that, in our opinion, the result was driven by myriad circumstantial, short-term factors and is the logical outcome of a system that is oversupplied. With that in mind, we believe it tells us very little about the future of capacity mechanisms in the GB electricity market.
The loyalty penalty is now recognised in policy as the source of consumer detriment. It was the subject of a 18 June letter from Business Secretary Greg Clark, in which proposals for new powers for the Competition and Markets Authority to provide better protections for consumers were laid out. We discuss these proposals in this week’s Policy section stating that, taken together with CMA Chair Andrew Tyrie’s proposals for reform of the competition and consumer protection regimes, this is an important area of work that suppliers will need to track.
We also discuss in Policy an evidence session of the BEIS Committee’s Financing Energy Infrastructure inquiry, held on 12 June that saw Chief Economist at the National Infrastructure Commission James Richardson call for a pot 1 Contracts for Difference auction to allow onshore wind and solar to benefit from the scheme. During the session, witnesses from industry, infrastructure and climate advice all demonstrated their support for onshore wind. In our view, pressure like this for a more supportive policy framework for the technology will surely increase as the scale of the 2050 net zero challenge becomes clearer.
The speech given by Ofgem Chair Martin Cave on 13 June, in which he set out three objectives that the regulator will focus on into the 2020s, was an important one. As we state in our Regulation section this week, the plans set out by cave, which focused on enabling competition and innovation, protecting consumers and “stamping out sharp practice”, and decarbonising to fight climate change at lowest cost, underlined the regulator’s more muscular approach to intervention and increasing priority on vulnerability.
In the same section we also take a closer look at the regulator’s draft Consumer Vulnerability Strategy 2050, which sets out its priorities in this area for the next five years. We find that the plan touches on a number of important subjects and points to potential upcoming obligations for suppliers. Ofgem has tightened its focus on vulnerability in recent years but thinks suppliers are still failing at the basics of identifying customers with additional needs.