Termination of Capacity Market contracts is rare but meaningful, typically affecting around 3% of capacity awarded in each T-4 auction. However, batteries face a higher rate of termination than other technologies. And as battery volumes grow with each successive auction, these terminations are becoming a more significant source of system risk.
​​On average 1% of capacity from T-1 Capacity Market auctions and 3% of capacity from T-4 auctions are terminated at any time. This is based on both de-rated capacity and connection capacity.
​The highest proportion of terminations were seen in the T-4 and T-1 2021/2022 auction. Since then, in both auctions, terminations have decreased.
While most terminations occur long before delivery and can reflect project delays rather than outright cancellations, the financial and operational consequences can be significant. DESNZ has measures to reduce these risks, but the pattern of terminations still represents potential lost capacity and investment, creating challenges for developers and asset owners, but also for NESO who has to operate the grid.
​For any further information on this topic, reach out to the author - shaniyaa@modoenergy.com
