Businesses set for revenue boost from TA capacity auction

The results of the latest Capacity Market’s Transitional Arrangements (TAs) auction have been welcomed as a boost for the role demand-side response can play in meeting security of supply.

Around 312MW of capacity was secured during the auction, with 373MW of capacity having bid for contracts.

The auction cleared at £45/kW meaning businesses involved in the ‘turn down’ initiative will share just over £14 million for shifting their power usage earlier or later in the day, or turning off lights, motors and pumps.

The Association for Decentralised Energy (ADE) welcomed the outcome.

Zero-carbon demand response

Tim Rotheray, Director of the ADE, said: “These results are returning value to energy users for helping keep the lights on, while also cutting emissions through zero-carbon demand response.

“Instead of paying power stations to increase supply, businesses will be managing demand in innovative ways while meeting all their energy needs leading to a more efficient, more affordable and lower-carbon system.”

He added: “This auction is designed to help lower costs and improve uptake of demand response so that this tool will play a key part of the future energy sector.

“The TAs are vital in supporting this innovative sector to grow, deliver Britain’s security of supply needs and ultimately help drive a more competitive demand response market."

The ADE estimates 10GW of untapped capacity is available through business-based DSR. It argues that to achieve this potential, user led demand response must be able to access all markets, from the Capacity Market and Balancing Mechanism to the wholesale market and ancillary services market, on an equal footing with traditional generation.

High clearing price

Robert Owens, Vice-President of Asset Optimisation at SmartestEnergy which was one of the firms which successfully secured capacity in the auction, said the clearing price was “far higher” than previously predicted.

He added: “With such a high price now set from the TA auction, we do have concerns that DSR will struggle to compete alongside existing and peaking generators in the next auction and are concerned that a significant drop in price may mean we lost momentum.

“We would like to see confirmation from National Grid that support will be provided to help DSR gather more momentum and make a significant contribution to the UK’s energy mix.”

> See the auction results