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UK's 2024/2025 capacity market target cut to 40.1 GW, but year-head target raised

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UK's 2024/2025 capacity market target cut to 40.1 GW, but year-head target raised

Highlights

Four year-ahead target down 1.1 GW

Year-head target raised 2 GW

Auctions open March 2, March 9

London — The UK government is seeking to contract 40.1 GW in the next four year-ahead capacity market auction (T-4) for delivery 2024/2025, in an auction due to start March 9, National Grid ESO said Feb. 9.

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A one year-ahead auction (T-1) for delivery year 2021/2022, to be held March 2, is seeking to contract 2.4 GW, the electricity system operator said. Mock auctions are to be held on Feb. 18 (T-1) and Feb. 25 (T-4).

The UK's four-year ahead capacity targets continue to fall.

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.

On the other hand, the T-1 capacity target is up a full 2 GW on BEIS' July 2020 guidance of 400 MW, likely reflecting anxiety at this winter's tighter generation capacity margins, which have caused periods of scarcity pricing.

Meanwhile BEIS de-rating factors (which determine by resource the level of capacity agreement a bidder can secure in the auctions) remain unchanged from July 2020 guidance.

Notable here are the factors for large interconnectors that will be bidding in the capacity mechanism for the first time.

The 1.4 GW NSL link to Norway has the best factor, of 90%, followed by the 1 GW Eleclink to France (75%) and the 1 GW IFA2, also to France (71%).

Considered much less "firm" is the Viking Link to Denmark, its 1.4 GW de-rated to 52%, meaning it can only hope to gain an agreement for up to 728 MW.

Under the capacity mechanism, successful capacity holders are paid fees for being available for the relevant delivery period. The last T-4 auction in March 2020 cleared at GBP15.97/kW/year ($22.01/kW/year) for 2023/2024. Capacity agreements were awarded to 43.75 GW.