CMUs which have secured a Capacity Agreement at an Auction must deliver against their Capacity Obligation at any time of system stress during the Delivery Year, or face a financial penalty. The Delivery Year runs from 1 October to 30 September. For example, the "2018 Delivery Year" will run from 1 October 2018 to 30 September 2019.
A Capacity Provider is obliged to deliver the "Adjusted Load Following Capacity Obligation" for all of their units during a "System Stress Event". This is a period of (involuntary) load reduction, by voltage reduction or demand disconnection, which is necessary to maintain the security of the system in the event of a shortage of generation.
When a shortage of generation is anticipated, a Capacity Market Warning will be issued by the System Operator. Capacity providers will not be 'called upon' to deliver capacity or receive an individual despatch instruction. The Capacity Market Warning is a signal to all providers that system stress is anticipated. Four hours after the Issue of the Capacity Market Warning, if a System Stress Event occurs, any Provider who fails to deliver their Adjusted Load Following Capacity Obligation will be subject to penalties.
Penalies are related to a provider's Capacity Market Payment. Penalties are capped at 100% of a Capacity Provider's anual Capacity Market Payment with respect to a CMU, and at 200% of a CMU's monthly Capacity Market Payment.
Capacity Market Notices
A Capacity Market Notice is a signal four hours in advance that there may be less generation available than National Grid, acting as System Operator, expects to need to meet national electricity demand on the transmission system taking into account additional operational reserve requirements. The notices are intended to be a signal that the risk of a System Stress Event in the GB electricity network is higher than under normal circumstances.
Capacity Market Notices are communicated automatically by National Grid systems to the following website: gbcmn.nationalgrid.co.uk (to learn more about Capacity Market Notices and System Stress Events please refer FAQs on the website).
In the event of a Capacity Market Notice being activated, it is recommended that industry participants make themselves aware of other operational information available to the industry closer to the time the notice is active from.
Under the Rules of the Capacity Market, Capacity Providers are needed to only generate during a System Stress Event.
If a Capacity Provider fails to deliver its Capacity Obligation, penalty charges will be applied in accordance with Electricity Capacity Regulations. Similarly, Capacity Providers will be paid for over delivery if they deliver above their Capacity Obligation.