Clock is ticking on valuable Capacity Market opportunity
Now is the time to prepare for the next Capacity Market auctions, which could provide a reliable 15-year revenue of up to £250k per MW
What is the Capacity Market opportunity
The Capacity Market rewards generators and consumers with flexible energy assets for committing to supply an agreed amount of power to the grid, or reduce their demand on the grid, during occasional 'System Stress Events'.
This is a safeguard against the rare occurrence of power demand exceeding supply. In this way, National Grid aims to ensure that there's enough spare capacity in the national power network to secure the UK's future electricity system.
'System Stress Events' occur very rarely and the duration of this supply is expected to last no longer than 30 minutes. If National Grid calls such an event, Capacity Market participants are given a four-hour warning to deliver their agreed capacity to the grid.
Start preparing now
The registration and pre-qualification deadline for the next two 2019 auctions is September 2018, which means that organisations should start the application process by July at the very latest.
As Europe's leading Demand Side Response (DSR) provider, Centrica Business Solutions can handle the entire Capacity Market process. This starts with the complex paper work to register and pre-qualify your generation or DSR resources. We will ensure that your application is correct and submitted ahead of the September deadline.
We have a 100% pre-qualification success rate for CHP units and won the highest number of new-build contracts in the 2016 Capacity Market auction.
Get ready for auctions
Two Capacity Market auctions will take place during the early part of 2019:
- New generators, such as Combined Heat and Power (CHP) systems, which have not been commissioned before the end of the prequalification process have the opportunity to secure a 15-year contract via the T+4 (four-year ahead) auction. To secure the contract it is necessary to agree to deliver the agreed capacity from 2021/22.
- Older generators and organisations with flexible demand assets can enter the T+1 auction for 1-year contracts – to be delivered from 2019/20.
- The Capacity Market delivery year for both auctions usually runs from 1 October to 30 September.
- The T-4 auctions tend to suit larger generators, who can secure a future reliable revenue stream, while T-1 auctions are better suited to DSR providers.
Those who pass the complex prequalification stages and then succeed in the auction become 'Capacity Committed' providers. They are then awarded a fixed price contract (for either one year or 15 years) by National Grid to deliver the electrical capacity agreed at auction. There is, however, a non-delivery penalty for those failing to supply their agreed capacity.
Centrica clients are, however, fully protected. We have such a strong track-record of reliable delivery to the grid that we are confident in bearing the risk and guarantee no pass through of any Capacity Market penalties to our customers.
Additional revenue stream
As market leaders in DSR, Centrica Business Solutions offers CHP clients the opportunity to earn additional revenue by participation in the lucrative Static Firm Frequency Response (FFR) market. This is a DSR incentive scheme to manage grid frequency tolerance levels. Where appropriate, we can offer customers access to the even more lucrative Dynamic FFR market.
Our team has the specialist knowledge and technology to succeed in generating substantially more FFR revenue for customers than our competitors. This is achieved by bundling customers' assets across multiple locations, or seamlessly integrating them with other customers' assets to maximise qualifying capacity.
End-to-end expert service
Centrica provides a seamless market integration process for customers – starting with handling the complex pre-qualification stages – then moving to pre, during and post-auction submissions – through to successful delivery and settlements – resulting in maximum, transparent revenue returns.
Make sure you don't miss the Capacity Market deadline. To learn how you can unlock the potential of your CHP, contact: firstname.lastname@example.org
* Potential revenue across a 15-year Capacity Market contract. This is an indicative figure calculated on average per KW per year from past Capacity Market auctions. The final price and revenue is dependent on the new auction clearing price.