We all know that demand for electricity is increasing but nearly half of the UK’s generating capacity is due to retire within 15 years. And much of the new-build low carbon generation is intermittent.
The Capacity Market is designed to encourage generators to invest and then generate electricity, and large users to use less electricity when the network most needs it. It’s one step closer to more active management of demand in the electricity network, ensuring we all have enough affordable electricity when we need it most.
The process is managed through an auction set-up so that the most competitive prices are set. Capacity Providers who are successful in the auction are awarded Capacity Agreements, which confirm their Capacity Market Obligation and the level of Capacity payments that they will be entitled to receive, which are based on the auction clearing price.