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Contracts for Difference
Capacity Market Overview
The Capacity Market was introduced by The Department of Business, Energy and Industrial Strategy as part of the Electricity Market Reform programme to ensure the future security of our electricity supply.
The Capacity Market offers all capacity providers (new and existing power stations, electricity storage and capacity provided by voluntary demand reduction) a steady, predictable revenue stream on which they can base their future investments. In return for Capacity Payments revenue, providers must deliver energy at times of system stress, or face penalties.
Potential providers secure the right to receive capacity revenues by participating in a competitive auction process which will set the level of Capacity Payments. The first Capacity Auction took place in December 2014, for delivery obligations that will begin in October 2018.
Generating and Demand Side resources participating in the Capacity Market are termed ‘Capacity Market Units’ or CMUs.
A number of different generating and Demand Side Response (DSR) CMU types are defined in the Rules and Regulations, with generators categorised by their connection / settlement arrangements as well as by their existing / new status.
The terminology for CMU types is summarised below.
From 2015 Interconnectors will also be able to participate in the Capacity Market.
Options for Participation
The Capacity Market design provides a wide range of options for companies to participate. Capacity Agreements of between 1 and 15 years duration will be allocated to eligible resources through the Prequalification and Auction processes. Potential capacity providers will likely wish to explore the available options before commencing the formal Prequalification procedure.
The Figure Below presents a number of potential scenarios for existing and planned capacity resources.
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BEIS - CM
EMR SETTLEMENT LTD
OFGEM - CM
ELECTRICITY CAPACITY REGULATIONS
CM RULES 2015
Terms and Conditions