Annual report on the Delivery Body’s performance of its functions in relation to the Capacity Market
Reports, plans and updates
Publication date
Company
Industry sector
- Transmission Network
- Generation and Wholesale Market
The Electricity Capacity Regulations 2014 (the Regulations) require us to provide the Secretary of State with an annual report on the Delivery Body’s (National Grid Electricity Transmission plc, NGET) performance of its functions in relation to the Capacity Market (CM). This is the fourth of these reports, following the Capacity Market auctions held between January 2018 and February 2018. It covers the period 1 April 2017 to 31 March 2018 (the reporting period).
This report covers the fourth year of auctions, and the first Delivery Year. We conclude that NGET met its CM deliverables and obligations.
The scale and complexity of delivering and facilitating the CM has risen annually. The increased number of capacity agreements following each auction has increased demand on NGET in relation to CM Agreement management processes. This year, they also managed the highest number of Prequalification Applications, whilst a regulatory change prevented the Delivery Body from being able to consider new information from Prequalification Applicants during the appeal process increasing workload on the Delivery Body. The Delivery Body took a proactive approach in facilitating this process to reduce the potential impact on CM participants. Their auction system management also continues to receive positive stakeholder feedback.
Alongside the positive developments, there are important areas that NGET should address in the next reporting period.
- The CM Portal continues to lack the functionality required to facilitate the CM process as effectively as possible. We are concerned that the Delivery Body is not always using the Portal to meet the information sharing arrangements specified in the Capacity Market Rules. This must be addressed as a matter of priority.
- Stakeholder feedback suggests that parts of the Portal’s design unnecessarily increases complexity for CM participants. Furthermore, while NGET has taken a largely collaborative approach to facilitating proposed changes to the CM Rules and policy development, its IT system arrangements have slowed down implementation. We recognise there are wider CM framework issues to consider here as part of the CM Five Year Review. However, we would like to see NGET take active steps to improve its ability to respond to necessary policy amendments effectively.
- NGET should consider its current approach to resourcing the Delivery Body’s functions, given the current and (to be expected) increasing scale of demand.
We incentivise NGET’s performance through financial and reputational measures. We set out in the report their performance against the relevant incentives, including for Contracts for Difference (CfDs). This year was the first time stakeholders rated NGET’s performance in delivering a CfD allocation round. Feedback was very positive, setting a high benchmark for future years. However, NGET’s performance against the CM incentives was down on the baselines, resulting in a financial loss.