ADE criticises UK capacity market

The UK’s Association for Decentralised Energy says the government is failing business energy consumers by making the capacity market mechanism unfair and complicated.

The Capacity Market, a scheme used to ensure the lights stay on, closed at £18 per kW on Thursday, for a total cost to consumers of more than £1 billion. The auction was for capacity delivered in 2019/20.
Dr Tim Rotheray
Industry analysis shows that many manufacturers and other businesses could have provided better value, lower carbon options, such as highly-efficient combined heat and power plants and demand side response.

While 4.2 GW of business-owned generation successfully cleared the auction, UK Government statistics show an additional 3 GW did not even participate.

The ADE said that if this missing business-owned generation had participated, it would have given business £60m to improve their competitiveness, in addition to lowering the cost of the Capacity Market for consumers by tens of millions of pounds.

Approximately 450 MW of demand side response successfully cleared the auction, more than double last year’s auction. This user-led flexibility will provide £8.5m in value to support businesses’ bottom lines. However, hundreds of megawatts of potential demand side response did not participate due to what the ADE maintains are complex rules and unequal treatment, ‘leading to a significant missed opportunity for businesses energy users.’

ADE Director, Dr Tim Rotheray said: "There are hundreds of businesses across the UK ready to help keep the lights on and reduce the need for costly new power stations.  

"While the increase in demand response is welcome, today's Capacity Market results still show many of these companies find the auction process too complex and too unequal for them to participate and succeed.

"The Government has committed to reforming the Capacity Market to build centralised gas power stations. But any reforms must focus on making the scheme fairer and simpler for business energy users, bringing forward cost-effective, lower carbon options like combined heat and power and demand response.”

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