Capacity Market Framework Agreement

Updating target capacity for capacity auction The capacity market ensures security of electricity supply by providing payment for reliable sources of capacity. The implementation of the electricity market reform provides stakeholders with a comprehensive overview of RMS policy. The document contains chapters on the two main mechanisms put in place by the government to reform the electricity market: differential contracts (CFDs) and the capacity market, as well as details on measures to improve energy efficiency through the Electricity Demand Reduction (EDR) programme. Letter from Amber Rudd on the 2015 capacity auction on electricity market reform. This gives suppliers (as anticipated by the recent announcement of Ofgem`s price cap) the certainty that they can and should make arrangements by maintaining the supplier`s fees by customers during the standstill period, and CM contract holders that deferred payments can be financed immediately and in full after the expiry of the standstill period. As part of the government`s electricity market reform, the capacity market will ensure security of electricity supply by providing, in addition to electricity revenues, a payment for reliable capacity sources to ensure that they provide energy if needed. This will encourage the investments we need to replace older power plants and provide backup for more intermittent and less flexible low-carbon generation sources. In the meantime, at the request of the UK Government, National Grid and Electricity Settlements Company continue to operate the Capacity Market programme to ensure that capacity providers can benefit from deferred payments after the standstill period (subject to State aid authorisation). Additional steps are being taken to verify the continuity of billing agreements for suppliers. The UK government will hold an auction of T-1 blend in the summer of 2019 to be delivered in winter 2019/20, with all agreements subject to the results of the Commission`s formal investigation. The UK government will soon discuss the regulatory changes needed to allow a T-1 auction. The June 2014 impact assessment explains why the government is intervening in the market, as well as the costs and benefits of the intervention.

The government published its response to the consultation on the proposals for technical changes to the capacity market and adopted the necessary provisions in parliament. The capacity market has also been developed to support the development of more active demand management in the electricity market. The government has set up the capacity market (CM) as part of its policy of reforming the electricity market. It aims to encourage investment in more sustainable and low-carbon electricity capacity at the lowest cost to energy consumers. . . .

Author: Franck Pertegas

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