DESNZ publishes response to consultation on Capacity Market changes

Article summary

The Department for Energy Security and Net Zero (DESNZ) has published its response to the October 2024 consultation on proposed changes to the Capacity Market (CM), aimed at maintaining security of electricity supply while enabling the decarbonisation of unabated gas plants. In response to stakeholder feedback, DESNZ intends to: (1) lower the capital expenditure threshold for ‘refurbishing’ three-year CM agreements to £65/kW for CM Units prequalifying in 2025; (2) require all substantially refurbishing and new combustion power plants participating in the 2026 T-4 CM auction (for the 2029-30 delivery year) to have a credible decarbonisation plan in place before operations begin—either through conversion to hydrogen to power or to power carbon capture, usage and storage (CCUS); and (3) introduce a new exit pathway, allowing multi-year CM agreement holders to exit without penalty and transfer to a Dispatchable Power Agreement, facilitating conversion to power CCUS.