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Capacity Market auction results: February 2018

Capacity Market auction results: February 2018

Record low clearing price reflects limited need for new capacity.

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Simon Virley - Partner and Head of Power and Utilities

Partner and UK Head of Energy & Natural Resources

KPMG in the UK

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Capacity Market auction results: January 2018 - light bulb from black wire on grey background

The latest T-4 Capacity Market (CM) auction cleared at a record low price of £8.40/kW. Our analysis explains the potential implications for the energy sector.

Headline results

  • This year’s auction means a big shift away from coal, with nearly 8GW of existing coal stations missing out on agreements. 
  • Existing gas and nuclear, plus new interconnectors and decentralised energy are filling the gap, as we transition to a power system that is both more localised and more international, with decreasing dependence on large-scale power generation.
  • Biggest challenge for security of supply in GB market is now about providing flexibility rather than the overall level of capacity.
  • Low clearing price will make it harder to progress case for new large-scale gas-fired capacity until the electrification of transport increases the overall demand for electricity. 
  • The January 2018 T-1 auction cleared at £6/kW, securing 5.8GW of capacity, with the total cost of CM ~£1b for 2018/19.

Download the full report now to learn more.
 

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KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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