The scheme – which pays generators to commit to providing extra power, or entities to reduce demand, at times of system stress – was suspended in November 2018 by the European Court of Justice, following a legal challenge from a clean energy company. It argued that the market favoured fossil-fuel generators rather than providers of demand-side response (DSR) solutions.
In October, the Commission said it did not find any evidence that DSR operators were disadvantaged, and concluded that the capacity market was “necessary to guarantee security of electricity supply in Great Britain”.
The decision will unlock around £1bn (US$1.3bn) in back payments for last winter. Additional auctions for capacity, to be provided one year, three years and four years ahead, will now take place in the first quarter of 2020.
In addition, the UK Government has already agreed to a number of changes to the market rules that will address some of the concerns of DSR providers, such as lowering the threshold for capacity market bidders to 2MW and introducing longer-term contracts.
Meanwhile, the UK was subject to a major blackout on 9 August, when more than one million customers lost power following two, almost simultaneous, power-plant outages: at the Little Barford gas-fired power plant, followed minutes later by the Hornsea offshore wind farm.
While some commentators initially suggested the growth of renewable energy made the grid less stable, National Grid’s initial report blamed a lightning strike, and its CEO, John Pettigrew, has specifically discounted growing volumes of renewables on the system as a cause of the blackout.
Equally, there is no suggestion that the UK’s capacity market would have enabled National Grid to better respond to the outage.