Spotlight On The Capacity Market

The Capacity Market kicks in from winter 2017/18, bringing new charges to the energy bill and making load management during winter peak periods an even more critical element of a business’ energy strategy. To help explain the Capacity Market and what action should businesses be taking, Inenco has produced a handy guide, summarising how it works, what charges will be added to the bills, and what the cost of the scheme is currently forecast to be.

Three key points to remember:

• The Capacity Market could be a significant new cost item on your bill. Forecast costs for winter 17/18 could be up to £7/MWh: it pays to understand how your business is affected and what action you should be taking to revise forecasts and mitigate the impact.

• Some of the Capacity Market charges will be determined by your time of use. The CM Operational Levy will be based upon a business’ consumption between 4pm and 7pm, Monday to Friday, during November to February. Finding ways to shift load away from these times or reduce overall consumption will not only avoid higher Capacity Market charges but also help to reduce network charges also priced based on peak demand periods.

• Suppliers are taking different approaches to charging businesses for the Capacity Market: whilst some will pass on costs through a monthly charge, others will add on a cost per kWh during peak periods or even fix the cost from the outset of a new contract. Understanding how your supplier is approaching this is crucial to support your budget forecasting.

Dates for your diary:

Whilst T-4 auction for capacity to be delivered in 2020/21 began on 6^th December, with results expected by the end of the month, the T-1 auction for Winter 2017/18 capacity is scheduled to begin on Tuesday 31^st January. By February 2017, forecast costs for the coming winter will become clear.

Download our simple Capacity Market guide by clicking on the icon below: