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23 February 20235 minute read

Proposed changes to the Capacity Market – have your say

The UK Government consultation Strengthening security of supply and alignment with net zero closes on 3 March 2023 and includes proposed changes to the Capacity Market, a scheme which makes sure there is enough capacity to meet peak electricity demands and safeguard against future blackouts.  The consultation includes proposals aimed to ensure that Great Britain is fit for a net zero future while ensuring the security of the electricity supply. The proposals seek to improve the robustness of the energy supply and provide greater incentive for investment in low carbon technologies central to homegrown energy.

The consultation is an opportunity for oil and gas generators and entities participating in the Capacity Market to provide feedback on the proposed changes to the Capacity Market Rules and help mitigate barriers to decarbonisation. The government aims to publish a response to its consultation in spring 2023.

The consultation, can be found here.

You can respond to the consultation by email or online here.

Please contact Andreas Gunst if you would like our support in replying to this consultation or for further information on its proposals.



The Capacity Market is the scheme that the UK Government says sits at the heart of its strategy for ensuring the security of electricity supply in Great Britain, using competitive auctions to make sure there is enough capacity to meet peak electricity demands, which safeguards against the possibility of future blackouts.

The UK Government has released a consultation to reform the Capacity Market to better align with the government’s net zero targets. The consultation is seeking to ensure that the Capacity Market scheme keeps pace with the move to cleaner energy sources and technologies and can support the delivery of a decarbonised power system by 2035, without compromising security of supply.

The Capacity Market reform proposals at a glance:

  • Taking steps to strengthen security of supply by reorganising the Capacity Market’s approach to performance testing. This will help to ensure confidence as early as possible in the winter that capacity is available. It will also strengthen the non-delivery penalty regime to send a clear signal that capacity must be delivered in times of electricity system stress.
  • Aligning the Capacity Market with net zero through creating pathways to enable carbon intensive forms of capacity to leave their multi-year agreements early and to incentivise greener, flexible technologies to participate in the Capacity Market auction. Pathways include multi-year contracts for low carbon flexible capacity, such as smart ‘demand side response’ technologies and smaller-scale electricity storage.
  • Making additional improvements to the Capacity Market by clarifying auction clearing mechanics, amending the existing route for certain projects to exit the Capacity Market to become eligible to bid in a Contracts for Difference allocation round. Also considered is reducing the cost and administrative burdens for Independent Technical Expert reports currently required for material changes to construction plans.
  • Making new contracts for low carbon technologies to incentivise 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.

Energy and Climate Minister, Graham Stuart, said:

“As we move towards cleaner and cheaper energy, it is essential that the UK provides secure and affordable energy for all.

The plans set out today will deliver this reliable energy and ensure the scheme that sits at the heart of Britain’s energy security is fit for the future.”



A key consideration in this consultation for existing Capacity Market participants, relates specifically to those who have existing multi-year agreements with carbon intensive CMUs. The consultation is asking for input from these participants and their thoughts around the conversion from carbon intensive to low carbon generation and what additional operating expenditure will be incurred, depending on the technology of their CMU.

As such, power CCUS and hydrogen may have higher short run marginal costs through CO2 capture and storage costs, or potentially more expensive fuel costs for hydrogen relative to natural gas. Accessing a government support scheme or securing a refurbishing CM agreement as low carbon capacity could provide the required capex support. However, where CMUs have existing multi-year agreements, they would not at present be able to leave their CM agreements to access another support scheme, or to rebid into the CM as a low carbon refurbishing plant. Nor could Capacity Providers risk their CMUs being on outage for long periods for refurbishment, as this which could cause them to miss CM milestones and/or incur non-delivery penalties.

The consultation therefore asks, from the perspective of existing capacity providers, are there any additional barriers to decarbonisation which the government has not considered in the consultation and would it be necessary to terminate the CM agreement in order to decarbonise their CMU?

Please contact Andreas Gunst if would like our support in replying to this consultation or for further information on its proposals.