The Capacity Market is a scheme where electricity generators bid for a capacity agreement. Once awarded, that agreement legally binds them to provide electricity capacity as and when called upon to do so. The scheme as currently drafted does not allow for any wriggle room on deadlines due to events like the Covid-19 pandemic. The UK Government recognises this and is consulting on proposals to introduce temporary rules to modify the application of the Electricity Capacity Regulations 2014 and Capacity Market Rules during the pandemic.
The objective is to minimise, as far as possible, the risk of terminating and imposing termination fees on capacity providers that fail to meet an obligation as a result of the COVID-19 pandemic.
The areas the Government is proposing to temporarily modify include:
- Relaxing deadlines and obligations - such as extending the Long-Stop Date for both New Build CMUs awarded T-1 agreements for the Delivery Year (DY) 2020/21 and Refurbishing CMUs with multi-year agreements which start in DY 2020/21, by 12 months to 1 October 2021. To benefit from this extension, the plant will have to prove by 1 October 2020 that it would have met the milestones on time were it not for the impacts of the Covid-19 pandemic. The deadline for Unproven DSR CMUs to provide a DSR Test Certificate and complete a Metering Test is also extended by 12 months, in recognition that they may have difficulties in acquiring or recruiting DSR capacity during the pandemic (when overall energy demand is reduced).
- Reducing the data required – such as reducing the amount of data required to establish baseline demand from Unproven DSR CMUs with capacity agreements for capacity obligations which begin to have effect in the 2020/21 delivery year. They will only have to provide data from two working days rather than six working days from the six-week period preceding the settlement period. This is to reflect the fact that a lack of energy demand, particularly for commercial or industrial sites, may make it hard to demonstrate a temporary reduction in demand.
- Extensions and termination – increasing the time the Secretary of State can grant as an extension before an agreement is terminated from 6 to 12 months and introducing a new termination event that carries no termination fee where non-compliance arises from the COVID-19 pandemic or related restrictions.
Given the urgency, the closing date is 11.45pm this Thursday, 30 April 2020. For the full consultation, click here.
Head of IPE and Co-head of Energy and Utilities
Partner, Energy and Utilities United KingdomView profile