The T-1 Capacity Market auction for delivery year 2024/25 took place on 20th February 2024. After two years of high prices, this year’s auction had the potential to clear anywhere from £4/kW to £55/kW. So here are the top headlines from clearing price, capacity, and the resulting impacts on battery energy storage.
1. The auction cleared at a price of £36/kW
The auction cleared in bidding round 8 at a price of £35.79/kW following the exit of Sutton Bridge (0.8 GW) and Severn (0.8 GW). Before this point, only 230 MW had exited the auction. This auction had a wide range of possible price outcomes, dependent upon the actions of Sutton Bridge and Severn.
2. A record 7.6 GW of derated capacity won contracts
7.6 GW of derated capacity won contracts, a new record. Of this, 2.9 GW was gas and 2.8 GW nuclear, making up 75% of all contracted capacity. Batteries were the fourth biggest contributor, with 655 MW of derated capacity winning contracts.
3. 3.7 GW of battery connection capacity won contracts
A record high amount of battery connection capacity was awarded Capacity Market contracts at 3.7 GW. This was the largest connection capacity by technology winning contracts in the auction - exceeding the 3.5 GW of nuclear capacity. This shows the impact of falling derating factors for batteries.
4. T-1 contract value falls 64% for batteries
Batteries with a T-1 Capacity Market contract for 2023/24 will see a 64% reduction in contract value in 2024/25. This follows the fall in price and lower derating factors. Derating factors had fallen from 19% to 11% for 1-hour batteries and 37% to 24% for two-hour batteries compared to the last auction.
5. Gresham House, Zenobe, and Harmony Energy won the most contracts by capacity
Zenobe’s 200 MW Blackhillock won a contract, taking Zenobe into the top three owners with contracted connection capacity along with Harmony and Gresham House. All three focused mostly on two-hour duration systems - 70% of new build battery capacity winning contracts was from two-hour batteries.
Additional information:
- The Sutton Bridge and Severn CCGTs likely exited the auction due to the costs of fully restarting the operation of the plants after they fell into administration in 2020. This means they are now not expected to return online for next winter.
- The 267 MW (derated) Corby unit showed a high likelihood of exiting the auction with no future T-4 contracts in place. However, it remained in the auction and so will continue operating through 2024/25.
- The auction results suggest an additional 2 GW of new-build battery capacity could be online by October 2024.
- Two new batteries of greater than 100 MW won Capacity Market contracts. The new 144 MW unit at Teesside power station from Sembcorp and 200 MW Blackhillock from Zenobe. This suggests that 2024 will be the first time we see a battery of this size become operational in Great Britain.