Page 26 - Gi flipbook April 2019

the capacity market conundrum

plants, 6.3 per cent from imports and issues noted above could be corrected, requirements, but with no prospect
just five per cent from coal stations. perhaps replacing this condition with of receiving capacity mechanism
The UK government’s drive to shut a need to provide firm capacity or to payments for the privilege. With
all coal stations by 2025 puts greater increase penalties for non-delivery. renewables reducing generation hours
emphasis on gas-fired stations and at the most marginal CCGT power
renewables to fill the power generation At the moment the gas stations, this creates a profitability
gap. The key issue for gas plants is challenge without some form of fixed
whether they can make enough profit industry is in limbo, with income to compensate.
on the electricity they generate. CCGT plants obliged to This begs the question of how to
In the absence of a capacity stay available to meet peak ensure profitability in a way that will
mechanism, other incentives could not endanger security of supply. With
be offered so that gas plants are more demand requirements, but rising competition in the market driven
commercially viable. One option with no prospect of receiving by the growth of renewables, it will
would be to introduce a reserve of last capacity mechanism payments become necessary to reinstate the
resort to the market, similar to the for the privilege capacity mechanism payments – or
supplemental balancing reserve (SBR) some other alternative – to fill the gap
used in 2015 and 2016. Back then, created by the lost income.
SBR saw National Grid pay plants that The principles behind a capacity If this is not the case, it’s likely
were outside the commercial market mechanism are inherently sound; the that plant closures – both coal and
to be on standby to meet any shortfalls mechanism is designed to encourage gas – will be necessary to remove
during the winter months, when new-build capacity to ensure security of oversupply from the system and this
demand was at its highest, but unable supply. Other countries have followed will lead to significantly decreased
to respond to price peaks. Britain’s lead in introducing a capacity security of supply.
Under previous capacity mechanism mechanism, although their versions
rules, demand side response (DSR) are designed specifically to incentivise EnAppSys was founded in 2003 to
providers were only eligible for one- demand-response technology to offset provide cloud-based data services to
year contracts, whereas new-build or the unavailability of thermal, nuclear the GB power market and the legacy of
refurbished generation could benefit and conventional capacity. EnAppSys’ foundation service lives on
from the security of 3-15-year contracts. At the moment the gas industry is with a GB market data set stretching
If this disparity is addressed under a in limbo, with CCGT plants obliged to back to 2001. For more information visit
revised capacity mechanism, then the stay available to meet peak demand www.enappsys.com

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