The Capacity Market (CM) has certainly had its highs and lows in the last two years. Our Combined Heat and Power (CHP) clients had just got used to their regular monthly income and then a complaint raised by Tempus Energy with the European Courts resulted in it being put on ‘standstill’ in November 2018. This meant that all payments ceased and there was even an outside chance that payments made to date would be clawed back.

Fast forward to October 2019, and the courts decided that it was alright after all and not only were generators allowed to keep payments they had already received, they would also get paid for the standstill period as well. This ‘catch up’ payment is due within the next few weeks, which is a welcome boost to cash flow for many of our clients, especially at this time of year. Soon after this, we expect the routine monthly payments for the CM contract period October 2019 to September 2020 to commence.

Then we move on to the upcoming CM auctions:

National Grid (who manage the CM) normally only run a T-1 and T-4 auction for each CM contract year. The T-4 auction aims to contract most of the megawatt of generation they require comfortably ahead of the delivery year. The T-1 auction is there for any final ‘top-up’ that they require. We only have a T-3 auction this year because it replaces the T-4 auction that did not happen 12 months ago due to the CM being in ‘standstill’!

As it happens, National Grid recently announced how many megawatts they are looking to contract in the upcoming T-1 auction…… 0 MW, yes zero. So, the upcoming T-1 auction is basically a non-event.

Finally, we might start to speculate about what price the auctions will clear at. Whilst history is not always a good guide, it can help; the table below lists what all auctions to date cleared at the following prices per kilowatt.

If you want to delve deeper into the Capacity Market here is a good starting point. If you have any questions or would like to find out more please give us a call on 024 7669 8899.