UK Power Capacity Auction Sets Record Price in Tight Market
UK Power Capacity Auction Sets Record Price in Tight Market | OilPrice.com
UK Power Capacity Auction Sets Record Price in Tight Market
Putin has been making moves…
The Biden administration's electric vehicle…
The UK’s capacity market auction for 2027-2028 – designed to pay power producers to provide additional capacity to the grid in times of high demand – cleared at a record-high price for a four-year-ahead auction.
The clearing price at the auction on Tuesday was $82.20 (£65.00) per kilowatt (kW) per year - the highest ever for an auction that has been held four years in advance, according to the provisional results published by National Grid’s EMR.
A total of 42.83 gigawatts (GW) of power capacity was procured at the auction out of a target capacity of 44 GW.
Existing power-generating units secured 77.5% of the capacity entering the auction, existing interconnectors – another 13%, while power plants yet to be built secured 3.9% of the capacity awarded in the auction, the data showed.
The record-high clearing prices were not unexpected, as analysts see the UK capacity market as tight in four years’ time.
Early this month, Bloomberg reported, quoting estimates from commodity research firm ICIS, that the four-year-ahead (T-4) capacity market auction, awarding contracts to generators to have a power supply available at peak demand periods, could clear at a price as high as $86 (£68) per kilowatt per year.
Before this week’s auction, the previous record-high for the four-year-ahead (T-4) capacity was set at the auction last year, at a price of $80 (£63) per kW per year.
The highest-ever price for a capacity market auction was during the 2022 year-ahead auction, which cleared at the maximum price of $95 (£75) per kW per year.
This year, the government also has a maximum cap of $95 (£75) per kW per year for the year-ahead and four-year-ahead capacity auctions.
Commenting on the results of the latest four-year-ahead auction, Jefferies analysts wrote in a note carried by Reuters, “The high clearing price implies tight supply/demand dynamics in the UK power generation market and offers some protection to generators against gas/carbon driven weakness in wholesale power prices.”
ADVERTISEMENT
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
Join the discussion| Back to homepage
ADVERTISEMENT
Related Knowledge Center: Offshore wind energy
Over the next decade, U.S. offshore wind power is expected to grow from a single 30-megawatt wind farm off Rhode Island to more than 2,000 MW of capacity along the Atlantic Seaboard. There are contracts for wind power off the coasts of Massachusetts, Connecticut, New York, Maryland, New Jersey, Rhode Island, and Virginia.
The National Renewable Energy Laboratory has estimated the United States has over 4,000 gigawatts (GW) of offshore wind potential, enough to power the country four times over.
The growth in part being spurred by state solicitations, including in New York, where then-Gov. Andrew Cuomo (D) set a commitment of 9,000 MW of offshore wind by 2035, and in Connecticut, where in June 2021, Gov. Ned Lamont (D) signed legislation authorizing the construction of 2,000 MW of offshore wind by 2030.
The offshore development is also being driven by an investment tax credit set to end in December 2019 and is equal to 12 percent of expenditures. U.S. Sens. Susan Collins (R-Maine) and Tom Carper (D-Del.) have introduced a bill to extend the tax credit for up to eight years.
The Interior Department has held eight competitive lease sales that resulted in 15 offshore wind leases over 1.7 million acres that has the potential for 21 GW of capacity. In February 2022, the Bureau of Ocean Energy Management completed a bidding process that realized $4.37 billion for 488,000 acres across six lease areas in federal waters off New York and New Jersey.
Projects have also been proposed off the Southeast coast, off California and Hawaii, and for the Great Lakes.