Capacity market reforms to cut chance of blackouts, incentivise low-carbon energy

Great Britain's Capacity Market is a scheme that uses competitive auctions to make sure there is enough electricity available to meet peak electricity demands in order to prevent blackouts. It does not include Northern Ireland.

The new plans published for consultation today will ensure the scheme keeps pace with the transition to cleaner energy sources and technologies on the GB grid which are often cheaper than fossil fuels, albeit more intermittent.

The UK has committed to decarbonising its electricity system by 2035. Last week, new figures showed that a number of low-carbon records were broken in 2022 and the greenest year for energy generation overall.

Coal in particular, which is the most carbon intensive fossil fuel, has dropped from 43 per cent of the electricity produced in 2012, to only 1.5 per cent of generation in 2022.

The capacity market reforms include consulting on new contracts for low-carbon technologies to incentivise their participation, creating new timelines and requirements for oil and gas generators to reduce emissions from 2034, such as through implementing carbon capture and reducing running hours, and strengthening the scheme’s ability to deliver secure supplies when the grid is under stress.

Energy minister Graham Stuart said: “As we move towards cleaner and cheaper energy, it is essential that the UK provides secure and affordable energy for all.

“The plans set out today will deliver this reliable energy and ensure the scheme that sits at the heart of Britain’s energy security is fit for the future.”

Technologies such as grid-scale batteries are playing an increasingly important role in maintaining reliable electricity infrastructure. New technologies, such as carbon capture, and hydrogen power are also expected to come online over the coming decade.

Part of the proposals include new lower emissions limits in the Capacity Market which will kick in for new-build plants from October 2034. This means all new oil and gas plants receiving long term agreements through the capacity market will be obliged to lower emissions.

Renewable UK’s chief executive Dan McGrail said: “It’s vital that we decarbonise our electricity system completely by 2035, so this consultation represents an important step forward in that process.

“We need to incentivise more investment in new low-carbon flexibility in our modern energy system based on renewable technologies including wind, solar, tidal stream and green hydrogen. This will strengthen the UK’s energy security, enabling us to move closer towards energy independence in the years ahead.”