The government is seeking views on the performance of the Capacity Market (CM) and on any opportunities to consider in ensuring it remains fit for the future.
It has been five years since the legislation introducing the policies – the Energy Act 2013 – was passed.
The Capacity Market scheme provides payments to encourage investment in new capacity or for existing capacity to remain open to ensure the UK has sufficient reliable electricity available.
It allows eligible existing or new power generators, interconnectors and demand side response (DSR) providers to bid in auctions, committing to make capacity available throughout the delivery year in case of system stress.
They face financial penalties if they fail to deliver electricity – or reduce demand in the case of DSR – when required to do so.
The government believes the initiative is “broadly working as intended” and does not foresee the need for “fundamental change” at this point, however, it is aware of some concerns relating to certain aspects – such as the inability for some renewables to participate in the auction and interconnector de-rating factors.
BEIS states: “This call for evidence also provides a valuable opportunity to explore whether and how the CM needs to adapt in light of recent changes in the energy system and wider energy policy and to ensure it remains fit for the future.
“For example, we are aware that the energy market is rapidly changing with new technologies competing effectively with traditional generation assets. We need to consider how the CM can better support technologies such as demand rise response (DSR) and enhance participation of aggregators and other smart system services.”
The government intends to consult “promptly” on the priority issues that emerge, including the participation of renewables, following the call for evidence.
It is also conducting a five-year review of the Emissions Performance Standard (EPS), which limits carbon dioxide emissions from new fossil fuel power stations.
Both calls for evidence will run until 1st October 2018 and the outcome will be reported to Parliament next summer.