The UK's four-year-ahead (T-4) Capacity Market auction for delivery in 2024-2025 cleared in a twelfth round of bidding March 10 between GBP15.00-20.00/kW/yr ($20.81-27.74/kW/yr), National Grid data showed.
Provisional details of the actual clearing price and capacity volumes secured would be published around 1900 GMT March 10, the competition organizer said.
This is the sixth T-4 auction held in the UK. The highest clearing price in a T-4 auction was achieved in December, 2016 at GBP22.50/kW/yr. The last T-4 auction, held in March last year, cleared at GBP15.97/kW/year.
The auction, run over two days and a possible 15 rounds, was seeking to secure 40.10 GW of de-rated capacity. Some 51.98 GW entered the auction.
Excess capacity in the competition dropped from 13 GW at start of bidding March 9 to 4 GW after 10 rounds on day one, as the ceiling price fell from an opening GBP75/kW/year to GBP25/kW/year.
Excess capacity then dropped to 1 GW in the eleventh round March 10, ahead of clearing in the next and final round.
This year's T-4 capacity target of 40.1 GW was down 1.1 GW on the Department for Energy, Business and Industrial Strategy's July 2020 guidance, and down 3.2 GW on the last T-4 auction for 2023/2024 delivery. Before that, target capacity for 2021/22 was 49.2 GW, and more than 50 GW for 2020/2021.
Alan Smallwood, optimization director at asset manager Anesco, said there was speculation the clearing price could be higher this year, but in the end the outcome was "very much in line with previous auctions."
"I do believe, however, that high prices are coming over the next few years and that batteries are going to be really important for the system moving forwards," he said.
"For investors, we have seen what batteries have achieved to date in the ancillary services market and more recently in dynamic containment. We've also had glimpses of what they can do in the wholesale market, with a few days of exceptional returns. The capacity market really is just the cherry on top of the investment case," he said.
