Onshore wind has won its first contracts under the Capacity Market since the European Commission gave the green light for the mechanism’s reinstatement.
In the first auction, power for delivery in the winter of 2022-23 was bought at £6.44 per kilowatt per year, a new low for a multi-year auction, with the ESO procuring 45GW of capacity from 59GW of bids, including 14.5MW from onshore wind.
Some 14.5MW of onshore wind secured agreements in the T-3 auction.
Interconnectors – which can still compete under the rules for the European Union’s internal energy market during the Brexit transition period – won contracts for 2.8GW.
In the second T-1 auction, power for delivery next winter cleared at just £1/kW/year, with 3GW of capacity bidding for just 300MW of requirement and the ESO deciding to take 1GW, including 820MW from the Nemo interconnector linking Great Britain to Belgium.
The next auction, for the winter of 2023-24, is due to take place on 5 March.
Boz Bozhkov, SmartestEnergy’s Head of Markets for Smart Generation, said: “While we expect to see some price recovery, most of the conditions that led to the low T-3 clearing price are likely to persist and continue to suppress a more significant uplift in this market."
“It will not be until all coal and older CCGT shut down that we see more attractive values in this scheme. A more ambitious governmental and corporate carbon policies may also provide some much-needed wind beneath the wings of newer, cleaner and smarter energy mix.”