Capacity Market and CfD Bidding Strategies
The drive to decarbonise the UK power system while ensuring adequate security of supply led to the development of two key policy incentives: the Capacity Market and the Contract for Difference.
Capacity markets help ensure that an adequate level of capacity is available in the future to keep the lights on through an auction process. Contracts for Difference (CfDs) guarantee a price to renewable generators that they will be able to sell power at, to incentivise investment.
The introduction of these policies has altered the nature of investment and understanding and forecasting auction outcomes is now a key driver for the success of investors.
We have been closely involved in the development and operation of these key policy mechanisms.
For the Capacity Market, we provide the model used by National Grid to recommend the capacity requirement and calculate the Equivalent Firm Capacities (EFCs) for each auction.
For the CfD regime, we provide the CfD counterparty (the Low Carbon Contracts Company) with the models they use to determine supplier charges and the levels of their reserves.
Using this experience, we support a wide range of industry participants including independent generators and energy suppliers throughout each stage of auction participation, from pre-qualifying assets to understanding the effect on portfolio profitability.
We can:
- Support bidding strategies, including auction war game simulations
- Provide projections of how generating assets could be affected, including the impact on the wider energy market
- Understand the impact of the ongoing changes to the market design
- Provide you with models to use in-house in simulated possible CM and CFD auction outcomes.
Policies aimed at rewarding firm capacity or green generation can be a huge boost to an investment case, but it’s important to know how you should bid, what is available and what you are committing to. Having supported in the design of both of these mechanisms, we help clients maximise their opportunity in accessing these revenue streams.”
How we can help
Click to read our Capacity Market and CfD Bidding Strategies case studies
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