Capacity market reforms ‘good for storage’, says REA

The Renewable Energy Association (REA) has welcomed the latest changes to the capacity market, announced by the Department of Energy and Climate Change (Decc), saying they will make it easier for storage to get funding.

The trade association said that it still believes the capacity market is a “flawed mechanism” because it “does not sufficiently take into account carbon emissions and value for money”.

However, it said, the reforms will make it easier for energy storage projects take part in the transitional auctions, which offer targeted support to demand-side response (DSR) projects.

As part of its reforms, Decc agreed to a lower minimum size of load reduction DSR units to 500kW, which “should enable more storage to participate in the mechanism,” the REA said.

In a statement commenting on the changes, REA senior policy analyst Frank Gordon said the reforms are “welcome in terms of making it slightly easier for storage projects to take part in the transitional auctions”.

“We also welcome stronger penalties for not delivering capacity, which was previously missing from the scheme,” he added. “However, the scheme continues to support higher-carbon electricity generation, at a time when the Paris climate talks highlight how the UK must transition away from these sources.

“Renewables can offer the capacity we need and in the timescales required without the need for an expensive mechanism that adds little to new-build capacity.”

The reform package, released last week, also includes measures to buy more capacity through the capacity market; to buy it earlier; to increase the penalties faced by auction winners which back out of their contracts; and to end the advantage enjoyed by diesel generation in the auction.

The REA said it remains “highly concerned” by a proposed review of ‘embedded benefits’ grid charging.

“By attempting to address diesel in the capacity market, the government risks throwing the baby out with the bathwater by possibly changing grid charging in an attempt to restrict diesel generation awarded contracts,” Gordon said. “Diesel should not be supported, and an emissions limit would address this, without damaging knock on impacts for renewables.”

Last week, Labour slammed Decc for its reform to bring the capacity market auction forward, saying it will cause consumer bills to “shoot up”. In a statement issued to coincide with Decc’s confirmation of the new timetable, shadow energy secretary Lisa Nandy slammed the government’s decision, accusing it of “trying to bury the bad news” that the costs would be passed on to consumers.

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BDC 305 Jun 2023