The UK Energy Transition | Increased capacity market auction targets announced
Published on 5th Feb 2024
Welcome to our top picks of the latest energy regulatory and market developments in the UK's transition to net zero
This week we look at the announcement of increased capacity market auction targets, Ofgem's developing plans for energy industry codes, and more.
Government confirms increase in Capacity Market auction targets
The government has announced that the procurement targets for the forthcoming Capacity Market auctions will increase. The secretary of state for energy security and net zero, Claire Coutinho, confirmed in an open letter that the government would accept the recommendations put forward to it by the Electricity System Operator (ESO) in a recent report.
In line with the ESO's recommendations, the one-year ahead (T-1) auction target will be increased by 0.3GW to 7.7GW for the 2024/2025 delivery year, with Coutinho accrediting this to "technical considerations".
Similarly, "technical considerations " were given as the reason for accepting the ESO's recommendations to increase the four-year ahead (T-4) auction target by 0.5GW for the 2027/28 delivery year. Coutinho stated that for the 2078/28 delivery year, she has decided to set aside 1GW of capacity for the future T-1 auction, leaving a 44GW target for the T-4 auction.
In its report, the ESO set out the following factors that that it took into account when calculating its recommended targets for the auctions:
- expected non-delivery and known-non delivery by Capacity Market units in each delivery year; and
- Capacity Market units with operational Short Term Operating Reserve contracts due to end in each delivery year.
Ofgem publishes updated plans for energy industry codes
Ofgem has published a consultation on its proposals for consolidating energy industry codes.
The energy regulator's proposals follow it being granted new powers under the Energy Act 2023 to overhaul the code governance framework. The proposals include the creation of two unified electricity codes (one commercial and one technical) and one unified gas code. Ofgem estimates that these changes will save over £100 million over a 12-year period. The legislation gives Ofgem the authority to appoint code managers and grants it transitional powers to consolidate the existing codes.
Ofgem intends to begin the consolidation process before appointing code managers. This initial phase will involve bringing the consolidated codes under common contractual frameworks and simplifying them. The code managers will then lead the longer-term exercise simplifying the codes.
The regulator has chosen "vertical" consolidation within fuel types rather than horizontal integration across dual-fuel codes, as it considers this to be quicker and less disruptive. The Balancing and Settlement Code will remain a standalone code due to its complexity.
Ofgem is considering four options for transitioning to the new code governance arrangements:
- "big bang" – the new arrangements would come into effect for all codes at the same time;
- concurrent – the transition would begin simultaneously for all codes but would likely finish at different times;
- phased – each code would be allocated to one of two or three phases and their transitions would overlap; and
- fully sequential – the new arrangements would be implemented one at a time for each code.
The regulator's preference is the phased approach, which would allow for concurrent work and reduce complexity.
The deadline for responses to the consultation is 23 April 2024.
UK reaches 53,700 public electric vehicle chargers
The Department for Transport has published its quarterly electric vehicle public charging infrastructure statistics. A total of 16,600 public chargers were installed in 2023, a 45% increase year-on-year according to the data.
An analysis of the data reveals that the number of fast charging devices with a power rating above 50kW has grown significantly. There are now 10,118 charging devices with a power rating above 50kW compared to 6,887 in January 2023. This represents a 47% increase year-on-year.
The number of on-street charging devices has risen from 11,996 to 20,705 year-on-year, a 72% increase. Increasing the number of on-street charging devices is seen as critical for encouraging the public to make the switch to electric vehicles because they are more conveniently located than so called "destination chargers".
As an electric vehicle takes more time to charge than a fuel car takes to refuel, if electric charging points are within walking distance of households this will encourage people to make the switch. This is seen as a key factor in helping the UK to reach its net zero emissions target by 2050.
This week's article was written with the assistance of Jack Duffy, Johnny Hartrick and Madeleine Begg, Trainee Solicitors.