In a significant development for the UK electricity market, the Credit Assessment Price (CAP) has fallen below £100/MWh for the first time since 2021.
The CAP serves as a crucial figure in the electricity market, determining the necessary credit cover for suppliers and generators to mitigate potential defaults and ensure the availability of adequate collateral for debt repayment.
Over the past two years, the market has experienced volatility, leading to record-high CAP levels.
In September 2022, the CAP reached an all-time high of £415/MWh.
However, recent developments in the wholesale markets have prompted a decline in the CAP.
Elexon’s decision to lower the CAP follows a consultation conducted last week. The adjustment, set to take effect from 13th June, marks a significant step in stabilising the market and aligning the CAP with prevailing wholesale prices.
The impending reduction to £85/MWh will be the first time since 7th September 2021 that the CAP has been set below £100/MWh.
On that date, the CAP stood at £96/MWh.