The increasing share of renewable and low carbon sources, incentivised through market subsides, has led governments around Europe to introduce capacity markets.

Capacity markets are required to ensure that an adequate level of capacity is available in the future to keep the lights on.

In Great Britain, Capacity Market and Contract for Difference (CfD) auctions have been introduced through the Electricity Market Reforms (EMR). The introduction of these policies has altered the nature of investment and understanding and forecasting auction outcomes is now a key driver for the success of investors.

How we can help

We have been closely involved in the development and operation of these key policy mechanisms.

For the Capacity Market, we provide the model used by National Grid to recommend the capacity requirement and calculate the Equivalent Firm Capacities (EFCs) for each auction.

For the CfD regime, we provide the CfD counterparty (the Low Carbon Contracts Company) with the models they use to determine supplier charges and the levels of their reserves.

Using this experience, we support a wide range of industry participants including independent generators and energy suppliers throughout each stage of auction participation, from pre-qualifying assets to understanding the effect on portfolio profitability.

We can:

• Support bidding strategies, including auction war game simulations
• Provide projections of how generating assets could be affected, including the impact on the wider energy market
• Understand the impact of the ongoing changes to the market design
• Provide you with models to use in-house in simulated possible CM and CFD auction outcomes.