New competition for upcoming Capacity Market auctions

Research from Cornwall Insight’s Capacity Market Forecast highlights that the recent changes in Capacity Market (CM) rules and the technology mix will see greater competition and change in the technology entering* the T-4 auction in March 2021 compared to the previous T-4 auction.

Forecasted changes to the technology mix entering CM T-4

  • Combined Cycle Gas Turbines (CCGT) capacity will represent 41.0% of potential 2024-25 participating capacity – in comparison to 45.6% share capacity it has in the auction 2023-24.
  • Potential battery storage is set to account for 5.6%, up from 2.9% in the 2023-24 auction.
  • Onshore wind that could compete has risen from 0.9% to 4.1%.
  • Nuclear’s share of participating nameplate capacity falls from 8.6% to 5.3%.
  • Coal declines to 4.4%, down from 5.5%.
  • Offshore wind could enter the auction for the first time, representing 0.7% of nameplate capacity.
  • This year will also be the first time in which the new 1.4GW Viking Link interconnector will compete.

The below graph shows the projected technology split in the T-4 auction.

Technology in Capacity Market autions

Lee Drummee, Analyst at Cornwall Insight, said:

“The Capacity Market has seen various changes, among these are; a new minimum size of 1MW for all Capacity Market units (CMUs), long-term STOR is now able to enter the auction and unproven demand-side response (DSR) can get multi-year agreements. As well as this, new de-rating factors have been set for multiple technologies, including battery and DSR units. As a result of these, it is likely we will see higher levels of competition with a greater amount of capacity to participate.

“Although CCGT participating in the T-4 auction is forecasted to decline, this is primarily due to Keadby 2 winning a 15-year agreement in the 2023-24 auction. It, therefore, means it is unable to participate in this auction round. Other notable drops from nuclear and coal will be largely due to existing plants exiting the market in the years preceding 2024-25.

“Onshore wind is expected to be bolstered in the T-4 auction, and as well as this we anticipate offshore wind could enter the auction for the very first time. However, wind and solar assets will have the choice to enter the upcoming Contracts for Difference (CfD) auction instead. As the CfD has recently reopened to “established” renewables technologies, we expect much of this potential capacity will choose the CfD in preference to the CM.

“The next round of CM auctions is set to take place in March 2021, starting with the T-1 (Delivery Year 2021-22) on 2 March followed by the T-4 (Delivery Year 2024-25) on 9 March. The prequalification window for these auctions has been open since 20 July 2020. This will close on 11 September, with prequalification results scheduled to be published on 6 November.

“The upcoming auctions are expected to yield some interesting results that will help to shape our future generation mix.”


Notes to Editors

*Our view of the potential assets that could participate in the T-4 auction comprises of both assets that have participated in previous CM auctions (both successfully and unsuccessfully). It excludes plant that has active agreements for 2024-25 and includes new build assets that we expect will be able to commission in time for the Delivery Year.

**Nameplate capacity refers to the total generating capacity of an asset. Capacity Market agreements are awarded based on a de-rated capacity, with de-rating factors larger for technologies that are less able to guarantee their full output at times of system stress. Therefore, for example, the de-rated capacity of renewables such as wind and solar will be significantly lower than their nameplate capacity.