Lessons Learned From the UK’s Latest Capacity Auction

By District Energy posted 02-27-2018 15:36

  

Jason Deign, Greentech Media

Summary

A U.K. capacity market auction this month served up a lesson for market planners, after delivering prices so low as to discourage clean energy development.

The T-4 auction, which aimed to secure power capacity for 2021 and 2022, smashed pricing expectations with a clearing price of GBP £8.40 ($11.73) per kilowatt a year, down almost 63 percent from the £22.50 ($31.44 at current rates) achieved in a similar contest last year.

The result was hailed as a victory for U.K. bill payers.

"This capacity market auction clearing low once again proves that competition is successful at providing security of supply at the lowest cost to consumers," said Lawrence Slade, chief executive of industry body Energy UK, in a press note.

“[These auctions] have supported innovative, emerging technologies whilst ensuring we get the best value from existing assets," he said.

Other observers, though, questioned whether such low prices would support innovative, emerging technologies in the future.

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