GB Capacity Market: Secured Capacity by Delivery Year

Most of the electricity system is paid for what it produces. The Capacity Market pays for something else entirely: being there.

It is Britain’s insurance policy against the handful of hours a year when demand is at its highest and the wind is not blowing. This page is the official NESO register of what has been contracted, for which delivery year, and from what kind of plant.

What the Capacity Market is for

An electricity market that only pays for energy has an awkward gap in it. A plant that runs for thirty hours a year cannot cover its costs from thirty hours of sales, yet those are exactly the hours the country cannot do without. Left alone, that plant closes, and the shortage appears at the worst possible moment.

The Capacity Market fills the gap by auctioning agreements to be available. Providers commit to deliver when the system operator issues a stress notice, and are paid a fixed sum per megawatt for holding themselves ready. Fail to deliver and the payment is clawed back with a penalty on top.

Auctions run well ahead of the year they cover — a main auction about four years out, which is long enough for something new to be financed and built, and a smaller top-up auction a year out to adjust for what has changed. That is why the register carries several delivery years at once, each at a different stage of being filled.

What is secured, and when

The figures below come from the NESO Capacity Market register, which records every agreement, its delivery year, the technology behind it and whether it is still live.

Why the megawatts look small: de-rating

Capacity here is measured de-rated, and that single word explains most of the confusion these figures cause.

A unit is credited not with what it says on the nameplate but with what it can be relied upon to contribute when the system is under stress. A conventional plant is discounted for the chance of being broken or on maintenance at that moment. A battery is discounted far harder, because a stress event can outlast its charge: a unit that can sustain output for half an hour is worth much less than one that can run for four, even where both are rated the same.

The arithmetic is deliberately conservative, and it is the honest way to compare technologies that fail in different ways. It does mean the totals here are smaller than headline capacity figures elsewhere, including the nameplate ratings on our power stations page. They are measuring different things and both are correct.

Why the years must not be added up

Each delivery year in the table stands on its own, and summing the column would produce a number that means nothing.

Agreements can run for up to fifteen years, and a multi-year agreement appears once in every year it covers. Adding the rows would count the same plant repeatedly — a long agreement fifteen times over. The right comparison is between years, reading down the column to see whether later years are filling up or thinning out.

The status list is worth the same care. The register retains applications that never won an agreement and agreements later terminated or suspended, because the history is part of what makes the register auditable. Only live agreements count toward secured capacity, which is why the page separates them rather than reporting one total.

Who provides the capacity

The auction is technology-neutral by design: it buys availability at the lowest price and does not care what delivers it. The mix has changed as the cheapest way to be available has changed.

• Gas plant has historically been the backbone, because it can run for as long as it is asked to. Its de-rating is relatively light and it competes on being dependable.
• Batteries have grown quickly. Individually small after de-rating, but there are many of them and they can be built in a fraction of the time.
• Demand-side response — businesses paid to cut consumption when called — competes directly with generation, on the reasoning that a megawatt not used is as good as a megawatt made.
• Interconnectors hold agreements too, de-rated for the risk that a neighbouring system is short at the same time Britain is. Their contracted capability is on the interconnectors page.

The split between transmission-connected and distribution-connected capacity in the figures above tracks a slower shift: away from a small number of very large plants toward many smaller units embedded in local networks.

What it costs, and who pays

Capacity payments are funded by a charge on electricity suppliers, set in proportion to their customers’ demand during winter peak hours. Suppliers recover it through the tariffs they charge, so it reaches households as part of the price of electricity rather than as a separate line.

It is a modest component of a typical bill next to the wholesale cost of the energy itself — our breakdown of the price cap shows the relative sizes of everything a unit rate has to cover.

Whether it is money well spent is a genuine argument. Supporters point out that the alternative to paying for reserve is doing without it, and that involuntary disconnection is vastly more expensive than the insurance. Critics argue it has paid existing plant to carry on doing what it would have done anyway. Both positions are visible in the register: how much of each year’s capacity goes to new build rather than to plant that already exists is the number that argument turns on.