Utility Week

UTILITY WEEK | 23RD - 29TH SEPTEMBER 2016 | 15 Policy & Regulation LOCATION OF CAPACITY MARKET UNITS Source: National Grid fi gures triumvirate of problems is grid constraints, and as the Electricity Networks Strategy Group map shows, the northeast of Eng- land features areas with "very strong" and "strong" needs case for potential reinforcement. New mechanisms, such as demand response, coupled with the reinforcement work that National Grid is undertaking, will help to reduce this impact, but a leading utilities analyst says this is going to become an issue that the government will have to address "very soon". He adds that new generation will go where it is cheapest to develop, not where it is most needed, poten- tially exacerbating the constraint problem . Mammadov is also of this school of thought and suggests the UK looks abroad for a possible solution. He said: "Look at markets such as Ger- many to contrast it against, some plants have been prevented from closing even though they are loss making, because they are in electricity constrained areas." In the details design document, Decc did say it may look at the potential of zonal auc- tions in constrained areas, whereby a cap on the capacity in the area is imposed that can- not be exceeded. Mammadov predicts a decentralised answer to the solution, rather than changes to the capacity mechanism itself, because auctions have already taken place. "What I think will happen is National Grid will come up with some additional pay- ment to encourage people to keep plants where they need to be. "It will be a bit cumbersome to change the capacity mechamism because there has already been auctions, so maybe more ad hoc measures will be put in place if it becomes a problem – which I think it might." This need for location pricing could be extended down to the distribution network, as network operators try to get to grips with the increasing levels of embedded genera- tion and the growth in electric vehicles. The smart systems consultation the industry is running with government is exploring the opportunity to give the distri- bution operators local system operator pow- ers to address this, and it would make sense for them to be able to in‡ uence locational pricing in the capacity market as part of this. Demand-side response may provide a longer term solution to the regional con- straint problems, but the issue of not being able to control where new generation is placed looks set to continue. It seems as though a workaround solution will have to be developed as the problem becomes more chronic. "The capacity market drives down costs and ensures we can meet our energy demand at the lowest pos- sible price for bill payers." FORMER ENERGY SECRETARY AMBER RUDD East Midlands East of England Greater London North East North West South East South West Wales West Midlands Yorkshire and the Humber Region Units Capacity (MW) East Midlands 25 249.022 East of England 2 37.63 Greater London 1 18.722 North East 1 2.808 North West 21 2741.158 South East 15 214.887 South West 15 186.256 Wales 27 387.572 West Midlands 7 96.407 Yorkshire and the Humber 9 205.84 Sub Total 4140.302 Not included (information not available) 334.463 Sub Total 4474.765 Not Included (Doubled Up) 79.937 Total 4554.702 Existing generating CMU Existing interconnector CMU New build generating CMU Proven DSR CMU Refurbishing generating CMU Unproven DSR CMU Pre-refurbishment CMU New build interconnector CMU BREAKDOWN OF AWARDED CAPACITY BY CMU TYPE Source: Decc 1,939MW 8MW 448MW 1,862 42,014MW 209 21 1 2 74 2 ANNUAL ELECTRICITY DEMAND Source: National Grid 390 370 350 330 310 290 270 250 TWh/year 2005 2010 2015 2020 2025 2030 2035 2040 Gone green Slow progression No progression Consumer power Historic 309 CMUs 46.35 GW 86MW

• Cover