The Electricity Capacity (Amendment etc.) (Coronavirus) Regulations 2020

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations make amendments and modifications to the application of the Electricity Capacity Regulations 2014 (S.I. 2014/2043) (“the Principal Regulations”) and revoke provisions of the Electricity (No. 1) Capacity Regulations 2019 (S.I. 2019/862).

The Principal Regulations make provision for the purpose of meeting consumers’ demands for electricity in Great Britain by establishing a Capacity Market (“the scheme”) under which those who make capacity available (“capacity providers”) can obtain capacity agreements which give capacity providers rights to receive capacity payments (“capacity payments”) and which also impose obligations on capacity providers to provide capacity during one or more specified years (“delivery year”). Capacity agreements are awarded in competitive auctions (“capacity auctions”) held four years ahead of a delivery year (“T-4 auction”) and one year ahead of a delivery year (“T-1 auction”). Demand side response (“DSR”) capacity market units (“CMUs”) can be used to participate in the scheme and may provide capacity by reducing demand for electricity by turning down electricity consuming equipment. Further detailed and technical provision is made by the Capacity Market Rules 2014 (“the Rules”)(1).

Regulation 2 and Schedule 1 to these Regulations amend the Principal Regulations to give effect to commitments made by the UK, which are recorded in the decision of the European Commission on 24th October 2019 (Commission Decision SA.35980 – 2019/C). Part 1 amends the description of a DSR CMU to clarify that a DSR CMU cannot provide capacity primarily by using a storage facility which reduces its import of electricity when charging. Part 2 amends how the Secretary of State determines “target capacity” for auctions including the minimum target capacity to be set aside for each T-1 auction. Part 3 amends the “minimum capacity threshold”, which must be met for a CMU to participate in the scheme, from 2MW to 1MW. Part 4 revokes an exclusion which prevented CMUs which were also subject to long-term short term operating reserve (“STOR”) agreements from participating in the scheme. Part 5 amends provisions relating to the credit cover that must be provided by an unproven DSR CMU which applies to prequalify for a multi-year capacity agreement. Part 6 omits certain modifications made by regulation 87C of the Principal Regulations to relax credit cover requirements for new build CMUs awarded capacity agreements in the one-off three-year ahead auction (“T-3 auction”).

Regulation 3 omits regulations 26 and 35 of the Electricity Capacity (No. 1) Regulations 2019, which modified the application of the Secretary of State’s discretion in regulation 33 of the Principal Regulations in dealing with termination notices and non-completion notices given to capacity providers during the State aid standstill period for the scheme (ended by the Commission Decision referred to above).

Regulation 4 and Schedule 2 modifies the application of the Principal Regulations in respect of the operation of the scheme to take into account the effects of coronavirus on capacity providers’ ability to comply with obligations under capacity agreements. The modifications to regulations 33, 50, 69 and 70 of the Principal Regulations concern, respectively: the exercise of the Secretary of State’s discretion in relation to termination notices; the consequences of failing to meet satisfactory performance requirements; reconsideration by the Delivery Body of “delivery body reviewable decisions” (defined in regulation 68(1) of the Principal Regulations); and appeals of delivery body reviewable decisions to the Gas and Electricity Markets Authority. As some modifications will still apply at the time the Secretary of State is required to undertake the next five-year review of the scheme, regulation 81 of the Principal Regulations is also modified to ensure these Regulations are reviewed in the next review.

A full impact assessment has not been produced for this instrument as no, or no significant, impact on the private, voluntary or public sector is foreseen.

(1)

A consolidated version of the Capacity Market Rules 2014 are at https://www.ofgem.gov.uk/publications-and-updates/publication-consolidated-capacity-market-rules-0. Copies are available from the Department for Business, Energy and Industrial Strategy, 1 Victoria Street, London, SW1H 0ET.