Record capacity market auctions clearing prices – a sign of (uncertain) times

United KingdomScotland

On 22 February 2022, the Capacity Market (“CM”) T-4 Auction for 2025/26 cleared at an all-time high of £30.59/kW/year (see NGESO’s Auction Results published here), which was a marked increase on the previous year’s result of £18/kW/year.

Just a week earlier, the T-1 Auction saw the clearing price rise to a record £75/kW/year (see NGESO’s Auction Results published here). Again, this is significantly higher than the previous year which cleared at £45/kW/year.

Not only are these prices a stark increase compared with previous years, they are also the highest since the CM scheme was introduced by the Government in 2014.

T-1 Auction

The capacity target of 5.36GW for the T-1 Auction (for delivery from 1 October 2022) was higher than in previous years due to current uncertainties in the energy sector. In the auction, 4,996MW of capacity procured across 226 CMUs cleared at the maximum price of £75/kW/year. All the units cleared in the first round, and the backup sources of energy for this winter will include 3,385MW from gas, 411MW from coal, and 385MW from battery storage, among others.

T-4 Auction

More recently, the four-year-ahead auction for the 2025/26 period broke another record. Clearing at £30.59/kW/year, the total costs of Capacity Agreements awarded for 2025/26 was £1.3 billion over their lifetime. The capacity sources for the 2025/26 period will be:

Particularly notable is the tightening of capacity to 42.3 GW procured across 574 CMUs down from the 43.6 GW target set by the Secretary of State, due in large part to the exclusion of coal power plants from the CM.

Battery project winners were the stars of this CM auction. At over 1GW (or 3.3GW nameplate), this was an increase of approximately 800MW compared to last year with a notable increase in 2-hour-plus batteries participating. On the other hand, the amount of new-build gas assets that secured a long-term contract was almost 600MW lower than the year before, at 800MW. It is important to note that all of these new-build assets will have 15-year contracts, which will mean such assets will be supported beyond the Government’s target date for decarbonisation of the electricity system.


The record CM clearing prices can be attributed to a number of factors. The gradual decommissioning of fossil-fuel energy sources certainly played its role, particularly as a result of all but one the UK’s operational nuclear power stations scheduled to close by March 2028. The global shortage of gas exacerbated by the rising geopolitical tensions further feeds into the market volatility. Coupled with an increase in demand resulting from growing electrification in the transport and heating sectors, the decreased capacity participating has sent CM prices soaring.

With the shift to renewables and associated risk of intermittency issues, there is the potential for more system stress events in the future. Greater CM clearing prices are therefore needed to offset the intermittency of wind, solar and some other renewable energy sources, offering some much-needed comfort as to system security. This comfort comes at a price, as the costs of the CM scheme are ultimately borne by the consumers. With higher amounts of capacity up for grabs in the auctions, the surcharge on electricity bills will become more noticeable adding further costs to already unprecedented energy bills. In the wake of continued political and market instability, however, CM provides an important safety net while emphasising the need for energy security as the country transitions to net zero.