The Capacity Market (CM) was introduced by the UK Government to manage security of electricity supply and safeguard against the possibility of future blackouts.
CM participants are paid to ensure they’re available to respond when there is a high risk that a System Stress Event could occur. This happens very rarely. The vast majority of the time, participating assets operate as they normally would.
To earn CM revenue for our customers, we take their assets into capacity auctions where the price is set. Providers who are successful in the auction(s) are awarded a Capacity Agreement, which confirms their Capacity Market Obligation and their payments.
There are two capacity auctions each year:
- T-4 – this is the main auction; it buys most of the capacity needed for delivery in four years’ time. In this auction, new build generators can secure 15-year agreements.
- T-1 – these are top-up auctions just ahead of each delivery year. We generally use top-up auctions for sites which were not ready in time for that year’s T-4 auction. Most businesses will want to move into T-4 as soon as possible to take advantage of known, and higher, prices.