Who can benefit from selling energy generation capacity to the National Grid?

For any organisations generating their own energy, the Capacity Market can be a way to realise a steady, predictable revenue stream with little or no additional investment. Even organisations with small generators can benefit.

Posted on 25 July 2016.

The Capacity Market has been developed by National Grid Co (NG) to maximise current energy generation capabilities on the network and to encourage minimal use of the national grid.  Organisations that generate more capacity than they require for their own use from any form of generation*, but often with Combined Heat and Power (CHP), can sell their surplus to the NG.  This capacity delivers energy at times of system stress with four hours’ notice.  Even when there is no spare capacity, generating organisations can be paid for guaranteeing that their generation will be working at full capacity, although all capacity can be used by the site, with its balance of demand made up by imports.

Generating organisations submit bids at auction to supply their capacity to NG.  Two Capacity Market auctions have already taken place in December 2014 and 2015 for the delivery years of October to September 2018/9 and 2019/20.  The final prices for these two auctions were £19/kW and £18/kW.  A third auction is scheduled for December 2016 for the delivery period of 2020/21. 

Generators who are successful in the auction will benefit from a steady predictable revenue stream (capacity payments) that encourages them to keep existing generation available on the system.

To qualify for the auction process a pre-qualification submission must be made based on rules set by Government. For smaller generators, ie up to, say, 50MW, a system aggregator can prove a very attractive option.  An aggregator will bid to supply the NG and draw on the capacity of a number of separate organisations to do so.

“Resource, knowledge and time are required to bid at auction and this can be daunting.   Using the services of an aggregator can make selling spare capacity a straightforward and profitable exercise for even smaller generators,” comments Jes Rutter, Managing Director of Energy Consultants JRP Solutions Ltd.

Using an aggregator rather than bidding direct means that:

  • the generator can start selling their additional capacity without waiting for the next round of auctions.

  • the generator can effectively opt out of the bid process which can be a fairly burdensome exercise for those without specialist knowledge or experience.

  • no additional resources would be required to manage your obligations under the scheme as this would all be done by the aggregator.

  • expert knowledge and experience is invaluable in ensuring the smooth operation and delivery of the scheme’s obligations. For example, to ensure that adequate metering is in place to show unequivocally that the assets are generating during the system stress periods.

    If you would like to know more about selling your capacity to the National Grid and JRP Solutions aggregation services, please call us on 0800 6127 567, or email george.richards@jrpsolutions.com.(*including diesel, provided it is not already receiving any form of support mechanism such as ROC or RHI)

www.jrpsolutions.com

(*including diesel, provided it is not already receiving any form of support mechanism such as ROC or RHI)

Download our Capacity Market Aggregation leaflet