​Termination of Capacity Market contracts is rare but significant, affecting roughly 1% of capacity in each T-4 auction. Each auction awards more battery capacity than the last, meaning terminations now affect a growing share of the system and the risks they pose are becoming increasingly significant. Batteries see higher rates of termination than the average, particularly from earlier rounds with lower clearing prices and stricter de-rating factors.
​​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 often reflect project delays rather than outright cancellations, the financial and operational consequences can be severe. NESO has measures to reduce these risks, but the pattern of terminations still represents potential lost capacity and investment, creating challenges not only for developers and asset owners, but also for NESO.
​For any further information on this topic, reach out to the author - shaniyaa@modoenergy.com
