Capacity Market: Government consults on emissions limits

The proposed changes are intended to ensure existing capacity or DSR components that do not comply with the limits cannot receive capacity payments from 2025

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The government is seeking views on its proposals to make changes to the Capacity Market in order to comply with new EU carbon dioxide emissions limits.

The Recast EU Electricity Regulation came into effect earlier this month as part of the Clean Energy Package, introducing a requirement for capacity mechanisms to put carbon emissions limits in place.

In order to comply with these limits “in respect of new build capacity and unproven DSR” (demand side response) seeking to pre-qualify for the capacity auctions in early 2020, amendments to the Capacity Market rules came into force on 18th July 2019.

The proposed changes are intended to ensure existing capacity or DSR components that do not comply with the limits – such as coal, diesel and possibly some inefficient gas generation – cannot receive capacity payments from 1st July 2025.

The government is now inviting views on how to most effectively implement the remainder of the provisions, in respect of existing capacity.

It is consulting on whether emissions limits for existing generation should take effect on 1st July 2025 or 1st October 2024; what length of agreements should be awarded in the upcoming T-3 and T-4 auctions to refurbishing fossil fuel generation that will not meet the emissions limits; and how best to deal with false or inaccurate fossil fuel emissions declarations and the recovery of capacity payments in such cases.

Following the consultation, which is open until 6th September 2019, the government intends to consider amendments to the Capacity Market rules ahead of the upcoming auctions, expected to be held in early 2020.

The UK’s Capacity Market was suspended in November 2018 and is currently undergoing investigation by the European Commission.

Earlier this year, it faced fresh legal action from Tempus Energy after the government’s decision to keep the “unlawful” power plant subsidy scheme open after the EU Court of Justice ruled against it.

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