Capacity Market—key features
Produced in partnership with Sarah Pollock of Herbert Smith Freehills

The following Energy practice note produced in partnership with Sarah Pollock of Herbert Smith Freehills provides comprehensive and up to date legal information covering:

  • Capacity Market—key features
  • Electricity market reform and the Capacity Market
  • Capacity Market—the basics of the mechanism
  • Implementation of the Capacity Market
  • The Capacity Market Rules
  • Amendments to the Capacity Market Rules
  • Latest changes to the Capacity Market
  • How the Capacity Market works, in a nutshell
  • CM legislation and CM Rules in more detail
  • Who are the key parties involved in the Capacity Market?
  • More...

Capacity Market—key features

Electricity market reform and the Capacity Market

The Capacity Market (CM) is one aspect of the government’s wider Electricity Market Reform (EMR) programme. EMR was designed and implemented with the aim of meeting three competing challenges to the Great Britain (GB) electricity market (often referred to as the energy ‘trilemma’):

  1. the need to intervene in the market to financially encourage development of secure and reliable electricity capacity in the face of the rapid closure of old and obsolete power stations and the increase in inherently unpredictable intermittent renewable generation

  2. the need to continue to intervene in the market to financially encourage development of low carbon and renewable generation, in order to respond to climate change and to meet national legally binding carbon and renewables targets

  3. the need to do both of the above in a way which maximises affordability for the end consumer, who ultimately funds the costs of such financial interventions

Following lengthy consultation, in June 2014, the government confirmed the specific legal mechanisms that it would introduce to meet these challenges. Of these, the two primary pillars were (and remain):

  1. the CM regime—a legislative mechanism which aims to encourage the provision of reliable electricity capacity (in the form of generation, storage, interconnection, and demand side response—all discussed in more detail in this Practice Note), to avoid shortfalls in available electricity

  2. entirely separately,

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