Britain’s capacity auctions are “treating the symptoms, not the cause” of a “broken” energy market according to an industry thought leader. 

Peter Hughes, director of business development at Black & Veatch Europe, says that while the UK’s Capacity Market Mechanism is meant to eliminate the risk of a future electricity supply shortfall as old coal, gas and nuclear plants head towards decommissioning, auction results indicate a “bleak prognosis”.

Capacity market auctions allow power plant owners and developers to bid for fixed payments, either one year or four years ahead. In return they ensure the capacity is available when the grid needs it.

In the latest T-4 auction to secure capacity in four years’ time, the grid secured the 50.4 GW of reserve capacity it was looking for in 2021/22 at a bargain price of £8.40 per kW.  

However, Hughes says a closer examination of these results reveals that the UK’s energy market is “far from being in good shape”.

Instead of being a solution that addresses the cause of a potential future energy shortfall – a lack of large-scale, flexible and highly efficient capacity to replace what is being lost over the next few years – the T-4 capacity market auctions now appear to be delivering a “sticking plaster” strategy, Hughes says.

And rather than encouraging investment in technologies such as the latest combined-cycle gas turbines (CCGT), the auctions “encourage short-term solutions that do little to improve the UK’s long-term security of supply”.

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