UK electricity capacity auction clears at highest ever price

© Reuters. FILE PHOTO: The sun rises behind an electricity pylon in Manchester, Britain, January 18, 2022. REUTERS/Phil Noble

By Nina Chestney

LONDON (Reuters) -Britain’s auction to ensure enough electricity capacity for 2022/23 cleared at a record high of 75 pounds ($101.70) per kilowatt (kW) per year on Tuesday evening, National Grid (LON:NG) said.

Britain launched its power capacity market in 2014, offering to pay providers for making supplies available at short notice.

Britain usually holds auctions for power capacity about four years in advance of the delivery date and another auction for a smaller amount of capacity around a year before delivery.

Tuesday’s auction cleared at a record high, as prices for UK wholesale power have more than doubled over the past year on the back of soaring wholesale gas, coal and carbon prices.

In early 2020, the power capacity auction for 2020/21 cleared at just 1 pound/kW/year when UK wholesale power prices were a lot lower.

A total of nearly 5 gigawatts (GW) of capacity was procured in this auction, with nearly 3.4 GW from gas-fired plants, a provisional auction document showed.

Some 516 megawatts (MW) was procured from demand-side response providers, or firms that guarantee to cut industrial demand, 411 MW from coal, 385 MW from battery storage and the rest from other sources.

About 65% of the capacity procured in the auction was from existing power assets, the auction results showed, including one coal unit at Uniper’s Ratcliffe plant in Nottinghamshire.

Utilities such as Centrica (LON:CNA), SSE (LON:SSE), E.ON were among other winners of agreements.

($1 = 0.7375 pounds)