UK's four-year-ahead capacity market auction goes into second day of bidding

London — The UK's four-year-ahead (T-4) Capacity Market auction for delivery in 2024-2025 closed a first day of bidding March 9 with 4 GW of surplus capacity still in the competition and a potential clearing price now at or below GBP25/kW/yr ($34.72/kW/yr), data from auction organizer National Grid showed.

The auction, run over two days and a possible 15 rounds, is seeking agreements for 40.10 GW of de-rated capacity. Some 51.98 GW entered the auction.

Excess capacity in the competition dropped from 13 GW at start of bidding to 4 GW after 10 rounds as the ceiling price fell from an opening GBP75/kW/yr to GBP25/kW/yr.

It is possible the auction could clear in short order March 10, with market commentators noting the next round price spread dips below the Price Taker Threshold of GBP25/kW/yr, allowing existing capacity to exit the process.

The T-4 capacity target of 40.1 GW is down 1.1 GW on the Department for Energy, Business and Industrial Strategy 's July 2020 guidance, and down 3.2 GW on the last T-4 auction for 2023/2024 delivery. Before that, target capacity for 2021/22 was 49.2 GW, and more than 50 GW for 2020/2021.

This is the sixth T-4 auction held in the UK (there has been one T-3 auction and four T-1 auctions). The highest clearing price in a T-4 auction was achieved in December, 2016 at GBP22.50/kW/yr. The last T-4 auction, held in March last year, cleared at GBP15.97/kW/yr.