The Informer

This week's headlines: The latest T-4 Capacity Market auction achieves a record price; The UK could face an energy crunch in the years ahead due to delays in building new generation; Proposals for two new interconnector projects get a positive reception from Ofgem. Our industry round-up includes the latest updates from Government departments and energy regulators.

  • Regulatory news and consultations round-up

    Energy UK has published its response to Ofgem’s 10-Year Review of Capacity Market Rules.

    The Department for Energy Security and Net Zero has published more detail on Phase 4 of the Public Sector Decarbonisation Scheme. A funding pot of £1.17bn for public sector decarbonisation was confirmed in December 2023.

    The latest edition of the Digest of UK Energy Statistics DUKES has been published.

    Ofgem has published its decision on the Connection and Use of System Code CUSC modifications CMP398 and CMP412 Ofgem has published details of the Renewables Obligation Quarter 2 Mutualisation Payment Distribution 2021-22.

  • Record high prices in latest Capacity Market auction

    The latest Capacity Market auction to secure enough electricity for 2027/28 cleared at a record high price.

    The T-4 auction achieved a price of £65/kW/year, £2 higher than the previous high which was set last year.

    A total of just under 43GW of capacity was secured with most contracts being awarded to existing generation projects and gas being the most successful generation type. Almost 1GW of new-build battery assets were also successful in the auction.

    Fintan Devenney, Senior Energy Analyst at EnAppSys, said the high price reflected the fact that the margin of capacity above the demand curve ahead of the auction was the lowest ever seen, with 43.3GW entering against a target of 44GW.

    A record 7.6GW in agreements had been secured in the T-1 Capacity Market auction held earlier at a clearing price of £35.79/kW.

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  • UK heading for ‘energy crunch’

    The UK is heading for a “significant energy crunch” during the next parliament, according to a new report.

    Consultancy Public First said recent setbacks in bringing new electricity supply online have left a shortfall in the amount of secure supply available to meet demand in peak times.

    Its research found that over the next five years, the greatest risk to energy security will take place in 2028.

    The report said that while policymakers should pursue bringing more new renewable capacity online for the medium-term, extending the life of existing assets such as nuclear, biomass and gas could have a material impact on energy security by 2028. The UK will also have to strengthen efforts to limit increases to peak and total demand.

    “The UK is facing an energy crunch ahead, and while the initial options are limited, they should come alongside a suite of actions to prevent the UK from ending up in a similar bind in the future,” the report said.

    It said these should include policy decisions on managing demand, accelerating flexibility, and providing viable business models for a broader range of energy technologies.

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  • Two new interconnectors get provisional green light

    Ofgem has recommended approval for two new high voltage cable links to Europe which could help power millions of homes.

    The regulator has launched two separate consultations on its minded-to position for funding of the projects which it said would provide more capacity for both exporting and importing energy.

    The LionLink project would connect British and Dutch power grids and also Britain’s grid directly to Dutch wind farms in the North Sea.

    The Tarchon Energy would provide a direct power link between Germany and Great Britain. The 1.4GW 610km cable could provide 1.4GW of electricity capacity.

    Great Britain currently has 11.7GW of interconnection capacity already operational or under construction, and LionLink and Tarchon could add a further 3.2GW of capacity.  

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  • Faster progress urged on Net Zero infrastructure

    The Government has been urged to accelerate the development of policies to encourage more private sector investment in energy infrastructure.

    In a letter to ministers the chair of National Infrastructure Commission (NIC) John Armitt said faster progress was needed on business models for new low carbon energy generation capacity, specifically hydrogen generation and gas plants with carbon capture and storage (CCS) technology.

    He also called on the Government to speed up development of suitable business models in order to meet its objective to decarbonise the energy system by 2035.

    These goals require policy mechanisms to support private sector investment. Announcements on CCS, hydrogen transport and hydrogen storage business models in December offered more clarity to investors, especially about the timing of future decisions,” he said. “However, it is taking too long to make decisions on these policy mechanisms.

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  • Ofgem disappointed over grid connection delay

    Ofgem has given its approval to a three-month extension to National Grid’s Two Step grid connection process but said it was disappointed at the delay.

    Around 500 applications have been made through the process, representing over 150GW of new applications, which is equivalent to around a third of the total transmission pipeline within GB.

    National Grid Electricity Transmission (NGET) and the Electricity System Operator (NGESO) have requested the extension to the original timeline for the process and an extension of the clock-start to 1 March 2024 for all applications received between 27 November and 29 February.

    In a letter, Ofgem said it recognised that an “unprecedented volume” of new applications to connect to the transmission system has impacted the potential effectiveness of the process.

    “However, we would like to express our disappointment on the performance of NGESO and NGET with regards to this process,” it added.

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