Capacity deficit set to clear UK T-1 auction at cap

Around this time last year we wrote about the T-1 auction for delivery in 2021/22 clearing at a healthy 45 £/kW. Shorter term dynamics in the market are seeing T-1 auctions clear above the longer term T-4 auction clearing price around 18 £/kW as tight market conditions abound across Europe with high fuel prices and conventional capacity coming offline. This has led to the UK 2022/23 T-1 demand target being revised upward to 5361 MW, above the de-rated prequalified capacity of 5328 MW, implying a clearing price at the cap of 75 £/kW.

Of the 5328 MW of prequalified capacity, over 2 GW is comprised of “new build”, though a large volume of the gas new build has already been awarded in the T-4 auction for delivery in 2023/24. A significant volume of the new build is comprised of battery storage, with over 1 GW of nameplate capacity set to come online into this winter.