T4 Capacity Auction For 2023/24

By Paul Homewood





The results of the latest Capacity Market auction have been announced, this covering winter 2023/24.

Capacity amounting to 43.7 GW has been bought at a price of £15.97, a cost of £700 million pa. A further 1.6 GW has been bought in previous auctions on 15-year contracts. It is likely that up to another 10 GW will need to be bought in in future auctions for 2023/24.


The main highlights are:

  • Existing capacity is supplying 34 GW of the auction, incl:

1.3 GW Coal

18.3 GW CCGT

4.5 GW Combined Heat & Power

4.0 GW Nuclear

  • New build only amounts to 1.8 GW, of which the only CCGT is Keadby (0.8 GW), which according to Timera was already committed – in other words was going to be built anyway.
  • Three new interconnectors, NSL, IFA2 & Eleclink, supply another 2.6 GW.

In short, the Capacity Market mechanism is still not incentivising new build CCGT, which will be desperately needed when coal power finally disappears, along with older nuclear and gas power plants.

The Committee on Climate Change reckon that we will need about 20 GW of new capacity to offset these retirements by 2030.

The problem is that lower capital costs alternatives, such as OCGT, Demand Response and Storage, can out compete CCGT at the auction. However, none of these options are capable of providing reliable, dispatchable power for more than a few hours, and not the days on end which may be necessary at times.

OCGT, while cheap from a capital cost point of view, has very high running costs, and is therefore only viable at times of peak power prices. Worse still, DSR and Storage only have capacity for an hour or so. All of these are useful for catering during periods of demand spikes, but useless for providing reliable baseload.


The auction also highlights the growing reliance on interconnectors to Europe. Existing and new build will provide 5.3 GW of our standby capacity by 2023/24, a highly risky arrangement. Given that they are two-way arrangements, power will flow to the highest bidder, which means we may have to pay a premium to access our own generation.


Laughingly, as one our readers pointed out, our MPs seem to believe these interconnectors are “zero carbon”. This is is what his local MP, Caroline Dinenage, wrote on her Facebook, following a visit to the IFA2 terminal in Hampshire:

“…The Interconnector is projected to go live later this year and will be capable of exchanging 1,000 MW of power between Britain and France, enough to run around 1,000,000 homes with zero carbon power.

National Grid estimate that their interconnectors save over 17,000 tonnes of CO2 per month. IFA2 is a great opportunity for the Gosport constituency to play a huge part in the UK’s carbon net-zero targets…”

As he inconveniently reminded her in a letter, an interconnector does not create any power but merely passes on whatever the market dictates and Holland, Belgium and France have a mix of power sources. They are also connected to the European Grid so the power could have come from anywhere.

But as long as the carbon dioxide does not appear against the UK’s tally, that is somebody else’s problem.



March 18, 2020 at 01:06PM

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