UK four-year capacity market auctions run between £ 15-20 / kW / year

4 GW retire in the last two laps

Final price similar to the 2020 T-4 result

High prices are coming: Anesco

London –
The UK four-year (T-4) capacity market auction for delivery in 2024-2025 ended with a twelfth tender on March 10 between 15.00-20.00 GBP / kW / year (20.81-27.74 USD / kW / year), National Grid data showed.

Provisional details of the actual compensation price and guaranteed capacity volumes will be released around 7:00 p.m. GMT on March 10, the contest organizer said.

This is the sixth T-4 auction in the UK. The highest clearing price of a T-4 auction was reached in December 2016 at 22.50 GBP / kW / year. The last T-4 auction, held in March of last year, sold for GBP 15.97 / kW / year.

The auction, which took place over two days and over 15 possible rounds, aimed to obtain 40.10 GW of downgraded capacity. Some 51.98 GW went up for auction.

The excess capacity of the competition dropped from 13 GW at the start of the auction on March 9 to 4 GW after 10 rounds on the first day, with the ceiling price rising from an opening of GBP 75 / kW / year to GBP 25 / kW / year.

The excess capacity then dropped to 1 GW in the eleventh round on March 10, before being released in the next and final round.

This year’s T-4 capacity target of 40.1 GW was down 1.1 GW according to the July 2020 forecast from the Ministry of Energy, Business and Industrial Strategy and 3.2 GW at the last T-4 auction for a 2023/2024 delivery. Previously, the target capacity for 2021/22 was 49.2 GW and over 50 GW for 2020/2021.

Alan Smallwood, director of optimization at asset manager Anesco, said there was speculation that the compensation price could be higher this year, but in the end the result was “quite consistent with previous auctions “.

“I think however that high prices are going to come over the next few years and that batteries will be really important for the evolving system,” he said.

“For investors, we’ve seen what batteries have accomplished to date in the ancillary services market and more recently in dynamic containment. We also got a glimpse of what they can do in the wholesale market, with a few days of outstanding returns. the capacity market is really just the icing on the investment cake, ”he said.