Third capacity auction delivers DSR and battery storage schemes

The third of the government’s Capacity Market auctions, in December last year, ended with the securing of over 52 GW of electricity generating capacity for winter 2020/21, including two new gas-fired power stations and, for the first time, some battery storage capacity. 

As a result, British consumers have been given the certainty they need that their electricity demands will be met in the winter of 2020/21 and, by buying generation four years in advance, this also reduces the chances of unexpected electricity price spikes – according to the Department for Business, Energy & Industrial strategy (BEIS).

The four-year-ahead Capacity Market auction is the government’s main tool for ensuring a continuous and reliable energy supply during times of high demand, such as cold winters. The auction brought forward new gas-fired power stations for Kings Lynn and Spalding, as well as battery storage schemes.

Other successful bidders include demand side response (DSR) schemes – where large electricity users agree to turn down their usage during times of peak demand – which were three times as successful as the previous auction. Significantly less new diesel generation won contracts compared to previous auctions. 

The auction cleared at a lower cost than most forecasts – £22.50 per kWh – ensuring a secure energy supply at a fair cost to bill payers, added BEIS. 

Some observers were disappointed that the latest auction failed to stimulate the development of a good number of new gas-fired power stations; others were pleased to see the fall in the number diesel genset stations winning capacity and the emergence of ‘greener’ battery and DSR schemes.