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UK delayed T-1 power capacity market auction opens seeking 2.7 GW

London — The UK's replacement T-1 power Capacity Market auction opened Tuesday, with the government seeking to sign up 2.7 GW of capacity for 2019-2020 (October 1-September 30).

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The auction was originally scheduled to take place in January but was delayed by suspension of the market in November 2018.

The first of a possible 15 rounds stretching into Wednesday opened at 09:00 BST Tuesday with a price cap of GBP75.00/kW/year ($95.30/kW/year).

The original target capacity from the auction was 4.6 GW but in May, Secretary of State for Business, Energy and Industrial Strategy Greg Clark lowered the target to 2.7 GW.

In a letter to auction organizer National Grid, Clark said the reduction reflected more capacity than expected (amounting to 1,300 MW) electing to opt out of the capacity market but remain operational during the year.

Further, more new generating capacity than expected had commissioned early but had not prequalified for Tuesday's T-1 auction. The new capacity, much of which is quick to install gas-fired reciprocating engine technology, holds 15-year capacity agreements for future years.

In the last T-1 auction for delivery year 2018-19, 5.798 GW were awarded agreements at GBP6.00/kW/year.

The total forecast cost of these agreements was GBP34.789 million.

Existing agreements under the UK capacity market were suspended shortly after the EU General Court's November 15, 2018, judgment that the European Commission should have carried out an in-depth investigation into the market's design.

During the standstill, the scheme does not have state aid approval and monthly payments to CM-contracted generators cannot be made.

Since the CM was introduced in 2014, a series of auctions have been held securing capacity out until 2021-22, including four four-year ahead (T-4) auctions and one T-1 auction.

-- Henry Edwardes-Evans, henry.edwardes-evans@spglobal.com

-- Edited by James Burgess, newsdesk@spglobal.com