The Endeco Guide to the Capacity Market
The capacity market can be a confusing place, which is why we've unraveled the mystery to ensure businesses can find their energy flexibility, understand and access the market.
What is the capacity market?
The Capacity Market is a scheme operated by National Grid under which generators and certain consumers
receive a payment for delivering an agreed amount power onto the grid, or reducing their demand from the grid,
when there is a ‘System Stress Event’.
Contracts for providing this service, and for getting paid to do so, are awarded in annual auctions. There are two
auctions per year: one for delivery about a year ahead, and; one for delivery about four years ahead. The dates of
the auctions vary slightly from year to year, but the Capacity Market delivery year always runs from 1st October
to the following 30th September. The next auctions will be in January and February 2018, for delivery in 2018/19
and 2021/22 respectively.
Large generators tend to prefer the four-year-ahead auctions (called the ‘T-4’ auction) so that they can line up
the revenue in the future, whilst DSR providers are geared up for the one-year-ahead auctions (called the ‘T-1’
auction). If a provider is successful in an auction, then that provider becomes a ‘Capacity Committed’ provider,
and has a contract with National Grid to deliver capacity for a fixed annual price.