First ever Capacity Market auction
Ed Davey, Secretary of State for Energy and Climate Change, has officially confirmed the results of the first ever Capacity Market Auction.
Through the auction, the Government has procured 49.26GW of capacity at a clearing price of £19.40kW. This will cost a total of £0.96 billion (in 2012 prices), which works out at around £11 for the average household.
The auction is part of a strategy to drive new investment and secure energy supplies in the short, medium and long-term.
Ed Davey explains: “The Capacity Market is a bit like an energy guarantee. It works by making sure that there is enough capacity available to meet peak electricity demand in the future.
“The first stage of this process has been to estimate how much capacity will be needed in 2018/19, which is the first year the Capacity Market will be running.
“Electricity providers have then bid into this capacity auction, promising if they win a contract that they will be available to provide electricity when needed.
“In return, they will receive a steady payment on top of the electricity that they sell. This reverse auction ensures consumers get the best deal possible as it drives bids down to the lowest level possible.”
The official results of the auction have been published on the National Grid website.