2nd March 2016 | Posted by: Daniel Birkett | Industry News

The Department of Energy and Climate Change (DECC) has proposed changes to the current Capacity Market auction.

The DECC  has proposed changes to the Capacity Market auction in an attempt to "guarantee the nation's long term energy security, tackle the legacy of underinvestment and deliver an energy infrastructure fit for the 21st century."

The Capacity Market is a mechanism which pays power plant owners to provide back-up electricity at short notice, to ensure ample supply levels during the winter period. The DECC now plans to bring the auction forward by one year and purchase electricity capacity in January 2017 for delivery in winter 2017/18 to encourage additional investment.

Two auctions have already taken place to buy capacity which would be delivered in winter 2018/19 and 2019/20.
The government is keen to see new capacity brought online in the UK as all of the nation's coal-fired power plants are set to be completely shut down by 2025.

A consultation document released by the DECC states that the nation needs to secure more capacity sooner than originally planned in order to "to manage the increased risks we face in the next decade as the nation transitions away from coal and as older plants close."

The DECC also added: "By introducing the CM early, we allow the market to operate better, earlier and with less price volatility and uncertainty - a more efficient way of delivering energy security." It is expected that the next auction could purchase "significantly more capacity - perhaps over 3GW more".

For a more in-depth look at the Capacity Market, feel free to download our  Electricity Market Reform brief.