The Department for Business, Energy & Industrial Strategy has launched a consultation on the reform of the UK’s Capacity Market, the Government’s main mechanism for ensuring security of electricity supply.

Proposals for consultation are aimed to improve the robustness of the energy supply, provide greater incentive for investment in UK low carbon technologies and provide steppingstones to net-zero.

The Capacity Market (CM) uses competitive auctions to make sure there is enough reliable capacity to meet Great Britain’s peak electricity demands, safeguarding against the possibility of future blackouts. Since its introduction in 2014, the landscape in which the CM operates has shifted with renewable energy now making up a significant proportion of the electricity generation system. To ensure the CM is fit for the future, the Government is publishing action plans to ensure the scheme keeps pace with this transition to cleaner energy sources and technologies and can support the delivery of a decarbonised power system by 2035, without compromising security of supply.

This includes consulting on new contracts for low carbon technologies to incentivise their participation in CM auctions, creating new timelines and requirements for oil and gas generators to reduce emissions from 2034, such as through implementing carbon capture and hydrogen to decarbonise and reducing running hours, and strengthening the scheme’s ability deliver security of supply in times of electricity system stress.

The announcement forms part of the Government’s work to reduce the UK’s exposure to volatile global gas markets and energy costs for consumers in the long-term as part of the Review of Electricity Market Arrangements (REMA).

RenewableUK’s Chief Executive Dan McGrail said: “It’s vital that we decarbonise our electricity system completely by 2035, so this consultation represents an important step forward in that process. We need to incentivise more investment in new low carbon flexibility in our modern energy system based on renewable technologies including wind, solar, tidal stream and green hydrogen. This will strengthen the UK’s energy security, enabling us to move closer towards energy independence in the years ahead.”

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