Capacity Market—five-year review

Capacity Market—five-year review

Energy analysis: The government’s report on its five-year review of the Capacity Market (CM) concludes that the mechanism is necessary for maintaining security of supply and that the rules governing the market continue to be appropriate and cost-effective. Matthew Brown, senior associate, and Juliet Stradling, of counsel, both at CMS Cameron McKenna Nabarro Olswang, note the government remains committed to the fundamentals of the mechanism but signal a number of potential areas for development.

Original news

The Capacity Market has operated efficiently in its first five years, review concludes, LNB News 31/07/2019 98.

The Department for Business, Energy & Industrial Strategy (BEIS) has published a review of the CM’s first five years of operation, 2014–19. The review assesses the scheme to be working well and no major changes have been proposed. However, BEIS intends to continue to make incremental changes to the CM, on the basis of its operation and the responses to BEIS’ call for evidence.

What is the background to this report?

The government issued a call for evidence on the Great Britain Capacity Market and Emissions Performance Standards in August 2018 and published the responses in March 2019. The report also comes at the end of the first year of capacity being delivered under the full CM mechanism. There have been a number of recent changes to the CM framework, both to refine and develop the CM and to manage the ongoing standstill of the market following the annulment of its state aid clearance in November 2018.

Given the complexity of the CM framework, it is not surprising that the background and context of the report isn’t straightforward. At its core, the report on the five-year review has been published by the government with four aims in mind. These include:

  • satisfying the government’s obligations under the Capacity Market Rules and SI 2014/2043
  • forming the basis of a wider report that the government is obliged to lay before Parliament under the Energy Act 2013 (EA 2013), and
  • satisfying the terms of the original state aid clearance of the CM, even though that clearance has now

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