Yet another Capacity Market auction clears at lowest price to date

After a three-day auction of fourteen rounds, the Capacity Market T-4 auction cleared at £8.40/kW, a significant decrease from last year’s £22.50/kW. Boz Bozhkov, Head of Markets, comments on the provisional results.

The Capacity Market T-4 auction closed yesterday at £8.40/kW/year, securing 50.4GW of capacity for Winter 2021/2022. Existing generation won the majority of this capacity.

The pre-auction price expectations from industry experts ranged from £25/kW/year to £17/kW/year, however the final clearing price was significantly lower than everyone expected.

One of the drivers of this low price appears to be the willingness of nuclear and coal to accept far lower price than many of the other participants, dragging the price down with them. If the 5GW of EDF nuclear and 2.6GW of coal were excluded, could the price have cleared close to £25/kW/year? 


Just 1.2GW was secured by unproven DSR, which is only half of the pre-qualified capacity this year and only 2% of the total awarded capacity. SmartestEnergy won 100MW of all new DSR capacity.

Battery storage won 151MW of capacity, however almost 1GW exited the auction when the price dropped due to cost associated with building new battery storage projects.

The big winners again were existing CCGT gas (23GW) and nuclear (7.9GW), and interconnectors also fared well with 4.6GW of capacity, including 2.15GW of new build.


Existing generation won 91.9% of the capacity in the T-4 auction, leaving just 762MW of new build and 1.2GW of new DSR. 83.8% of the new build capacity was awarded long-term contracts, while the rest will rely on agreements of shorter duration.

Existing generation won a very similar capacity to last year’s auction - 44.5GW in 2017 and 43.3GW this year - although the behaviour was very different, with a lot more choosing to accept lower prices.

The objective of the Capacity Market has always been to incentivise new investment in low-carbon capacity at the lowest price for consumers, but with so little new build coming through, is the first part of that ambition really being achieved? One cannot help but ask how would that impact the long-term transition to a cleaner generation mix fit for this century?

What these results will mean for the future energy market is not yet clear but until the Capacity Market separates existing generation and new build generation, we may not be able to see a level playing field.

To take full advantage of the current market, generators will need to stack revenue through different routes to market and work with a partner that can help them respond to these changing opportunities.

See the provisional results
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About the author

Bozhidar is responsible for analysing market opportunities to help asset owners maximise revenues. His role includes the continued development of processes and systems to enable customers to always optimise their positions and he also liaises with National Grid and DNOs to ensure access to all relevant opportunities. Bozhidar joined SmartestEnergy from KiWi Power where he was Head of UK Operations. He holds a Bachelor of Business Administration from Northeastern University, USA and a Master of Science in Economics and Policy of Energy and the Environment from University College London.

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