Capacity Market T-4 review

The Capacity Market (CM) was introduced by the UK Government as part of the Electricity Market Reform Programme to ensure the future security of our electricity supply. The Capacity market offers all Capacity Providers a steady, predictable revenue stream on which they can base their future investments. In return for such revenue, providers must deliver energy at times of system stress, otherwise face penalties.

The T4 Capacity Market Auction for Delivery Year 2027/28 went live on 27th February 2024.The auction opened with a target capacity of 44 GW.

Capacity entering the T-4 Capacity Market auction was 0.7 GW below the target. 44.2 GW of derated capacity was prequalified for entry, but 900 MW did not enter the auction.

The auction cleared in Round 2 (￡65-￡70) with the provisional clearing price being published at ￡65kW for all contracts awarded, the highest ever in the T-4 auction.? The final auction results and report are expected to be published on 8th March.

The clearing price in the T-4 Capacity Market auction has been increasing each year since the 2022/23 delivery year. Last year’s T-4 auction had a record-high price of ￡63/kW.

Flexitricity had 31 CM Units (CMU) in this auction, adding up to 134 MW of potential contracts.?This includes Existing Generating, Existing Generating – Storage, Proven DSR, and Unproven DSR CMUs.

The 2024 T-4 Auction has procured 42,830MW of capacity for delivery in 2027/2028. This volume has stayed stable at between 40,000 and 46,000 since the 2019 auction (for 2022/2023 delivery). The 2024 T-4 auction has awarded contracts to the highest ever % (98.75%) of the capacity entered into the auction, largely due to this being the lowest capacity entered into a T-4 auction, with 43,367MW.

Flexitricity have participated in all T-4 Capacity Market auctions since 2014, including 2019 which had a T-3 auction for delivery in 2022/2023, due to the 2018 T-4 auction being cancelled, as well it’s the regular T-4 auction for 2023/2024 delivery. Each year we have contributed at over 100MW of capacity to this market.

The prices seen in the T-4 auction have been increasing every year since the 2023/2024 auction in 2019, which was the lowest price ever seen in this auction.

Flexitricity has a dedicated team who manage the full end to end management of the Capacity Market, from prequalification, auction administration and agreement management. Get in touch with us today to find out how your assets could participate.