GB Capacity Market Prequalification

Key details of the capacity market auctions 

• T-4 Auction: Scheduled for the delivery year 2028-29 with a target capacity of 44.0GW. 

• T-1 Auction: Scheduled for the delivery year 2025-26 with a target capacity of 6.5GW. 

GB capacity market prequalification: key takeaways 

This article summarises the key takeaways and implications for the likely clearing prices from the auction. 

Insights into the T-4 Auction 

1. Tight margins: a historic low 

• This is the tightest margin of total prequalifying capacity above the target capacity in any T-4 auction to date, with only 45GW of derated capacity [1] entering the auction, including all conditionally prequalified capacity, against a target of 44GW. 

2. New-build units driving higher prices 

• ~8.7GW of derated capacity from new-build assets including batteries, DSR assets and gas-fired units are included in the schedule of prequalified units.  This makes it likely that the auction clearing price will be set by a new entrant – under the market rules, new entrants are eligible to set price above the “price-maker threshold” (historically £25/kW/yr) and secure multi-year contracts, whereas existing units are limited to setting prices below this threshold and limited to one-year contracts. 

3. Conditional units’ influence on prices 

• Should 2.5GW or more of the 6.6GW capacity that has only prequalified on a conditional basis not make it to the final auction (i.e. such that the total capacity entering would be 42.5GW or less), then the auction would clear before the first round at the maximum possible clearing price of £75/kW/yr. 

4. Growth in Battery Energy Storage Systems (BESS) 

• 4GW of derated capacity has pre-qualified – more than double last year’s level, with a greater proportion being units with longer durations (4hr+). 

5. Absence of new-build CCGTs  

• There are no new-build [2] CCGTs in the prequalification schedule – last year there were two, but Killingholme opted out of the auction leaving Eggborough to secure a contract. 

• A number of existing CCGT assets are entering as “refurbishing” – subject to undertaking refurbishment works above certain price thresholds, such units are eligible to set clearing prices above the price-maker threshold and secure multi-year contracts. Calon’s Sutton Bridge and Severn Power units and EPUKI’s Langage and South Humber Bank units are prequalified in this category. 

6. Interconnectors playing a key role 

• 12GW of capacity has prequalified of which 1.9GW is new-build. 

Insights into the T-1 Auction 

• A total of 16.6GW (9.8GW derated) capacity has prequalified or conditionally prequalified for the T-1 auction for delivery year 2025-26 against a target of 6.5GW, 

• The gap between prequalifying capacity and target is wider than for last year which saw a clearing price of £35.79/kW/yr after tighter auctions with clearing prices of £60/kW/yr and £75/kW/yr respectively in the preceding two years  

• 3.6GW of derated nuclear capacity has entered the auction, the highest of any T-1 auction to date. This is more than half of the target capacity. 

• Calon units Severn Power and Sutton Bridge have prequalified, collectively making up more than half of prequalifying CCGT capacity. 

• Greenlink, an interconnector cable between GB and I-SEM, has prequalified, making it the first interconnector to prequalify in a T-1 auction since the East-West Interconnector in the auction for delivery year 2021-22. 

• With a greater proportion of battery capacity being from longer duration assets (4h+), the total prequalifying derated battery capacity has risen to 1GW this year. 

This article sets out further analysis of the units qualifying for the upcoming auctions with breakdowns by technology and qualification status. 

GB capacity market prequalification: detailed analysis 

Prequalification challenges for conditional units 

This article presents an analysis of the prequalification statuses of assets entering these auctions. At the time of the first publication to the registers, many assets are prequalified on a conditional basis and would need to meet further conditions such as providing the necessary credit cover or relevant planning consents in order to be able enter the auction. In advance of the auction date, it would be necessary for every conditionally prequalified asset to have its conditional status re-evaluated to either prequalified or rejected in the updated registers, or to opt out of the auction altogether. This article reflects an analysis at the time of publication of the initial register publication.  

2028-29 T-4 Auction Summary: 

This is the tightest margin of total prequalifying capacity above the target capacity in any T-4 auction to date, with only 45GW of derated capacity entering the auction, including all conditionally prequalified capacity, against a target of 44GW. Around 6.6GW of this 45GW is comprised of capacity that prequalified on a conditional basis, and if just 1GW of this fails to meet its eligibility criteria, then the total capacity entering the auction would be less than the target. In such a case, a clearing price of at least £49/kW/year would be guaranteed [3], which would put the price in the top three T-4 auction clearing prices to date. 

Should 2.5GW or more of the 6.6GW conditionally prequalified capacity not make it to the final auction, such that the total capacity entering would be 42.5GW or less, then the auction would clear before the first round at the maximum possible clearing price of £75/kW/year. Such a price was seen in the T-1 auction for delivery year 2022-23, but never before for a T-4 auction. 

The total capacity to make it to this stage of the prequalification process includes ~8.7GW of derated capacity from new-build assets including batteries, DSR assets and gas-fired units. This makes it likely that the auction clearing price could be set by a new entrant. 

Total nominal prequalifying battery capacity increased from 10.8GW in the initial prequalification register publication in last year’s T-4 auction to 15.0GW in this year’s. However, the derated battery capacity has more than doubled year-on-year from 1.8GW to 4.1GW. This is in part due to the rise in the amount of longer duration capacity prequalifying which has higher derating factors than shorter duration capacity. Over half of the derated battery capacity in the auction this year is from assets with a duration of 4 hours or more. This is against ~23% in the previous year’s auction. 

Total prequalifying and conditionally prequalifying capacity has dropped from ~33GW (30.5GW derated) in last year’s auction to ~32GW (27.7GW derated) in this year’s. The largest component of this drop is in the absence of the new build Killingholme CCGT asset. In last year’s auction, it had prequalified but did not enter the auction, resulting in an even tighter auction. That auction subsequently cleared at an all-time high price for the T-4 auction. This year, the unit is not in the auction. 

New build asset Eggborough OCGT4 [4] has prequalified for this year’s auction with 299MW of capacity (280MW derated) and is eligible for a 15-year contract. Last year, the unit exited in the first round before the auction cleared in the second round at the all-time high clearing price. 

Previously mothballed Calon assets Sutton Bridge and Severn Power are back in this auction as refurbishing assets, having procured contracts 1 year in length in the last T-4 auction. They are eligible for 15-year contracts. 

Unlike in the previous T-4 auction, the South Humber Bank and Langage CCGT assets are entering the auction as refurbishing assets and are also eligible for contracts of up to 15 years in length. 

With Neuconnect and Greenlink entering the auction this year as new build interconnectors, the total prequalifying interconnector capacity stands at 12GW (7.6GW derated). This is the first auction in which Neuconnect, the first interconnector cable to link GB and Germany, has featured. Its 1.4GW of nominal capacity has been derated down to 840MW, lower than the 1050MW derated capacity from North Sea Link, a cable with the same nominal capacity. 

Greenlink, the new cable between GB and I-SEM of 500MW capacity (272MW derated) has also entered the auction as a new build cable. The asset procured contracts in the last two T-4 auctions and has now entered this year’s T-4. 

2025-26 T-1 auction summary: 

A total of 16.6GW (9.8GW derated) capacity has prequalified or conditionally prequalified for the T-1 auction for delivery year 2025-26 against a target of 6.5GW. 

Of the total prequalifying capacity, ~3.6GW (derated) is comprised of nuclear assets which did not participate in the T-4 auction for delivery year 2025-26. 

This is the highest volume of nuclear capacity in any T-1 auction to date, surpassing the previous record of 2.8GW in last year’s auction. The rise is attributable to additional units at Torness and Heysham 2 entering the auction. The recent increase in nuclear capacity in the T-1 auctions is due to the life extensions of the nuclear assets which happened after the dates of the relevant T-4 auctions for these delivery years had passed. With the target capacity this year dropping from 7.4GW last year to 6.5GW, the result is that more than half of the target capacity is covered by nuclear capacity. 

However, this is counterbalanced by a drop in prequalifying gas-fired capacity. Large CCGT units Corby, Rocksavage and Keadby have not entered the auction, resulting in total prequalifying CCGT capacity dropping by almost half from 4GW to 2.3GW.  

The Calon units Sutton Bridge and Severn Power have prequalified for the T-1 auction. Although this was the case in last year’s auction, the exit of these units in round 8 of that auction caused it to clear in that round, resulting in the assets not procuring contracts. Collectively these units contribute ~1.5GW of derated capacity to the auction which is the majority of prequalifying CCGT capacity, so their ability to significantly move the auction remains undiminished from last year. 

Less nominal battery capacity has made it to this stage of the auction process than by this point in last year’s auction, with ~3.5GW prequalifying or conditionally prequalifying against ~4.4GW last year. However, as with the T-4 auction, more long duration storage has prequalified this year than last year, resulting in the total derated prequalifying capacity rising to 1GW from 860MW. 

For the first time since the auction for delivery year 2021-22, an interconnector unit has entered the T-1 auction. Greenlink has prequalified with a nominal capacity of 500MW but a derated capacity of 245MW, indicating a smaller derating factor than it received for the T-4 auction. 

The GB Capacity Market prequalification highlights evolving trends in energy capacity, with a significant rise in battery storage and nuclear participation. These shifts, alongside the tightest T-4 margin to date, indicate potentially record-high clearing prices in the upcoming auctions.

Footnotes:

[1] Derating factors are applied to all capacity in the auctions to account for variability in availability during times of system stress since it is not assumed that 100% of procured capacity will be available 100% of the time. The derating factors vary by technology type.

[2] Combined cycle gas turbine

[3] The stated derated target capacity applies at a price of £49/kW/yr with +/-1.5GW adjustment to the stated applying at price thresholds of £0/kW/yr and £75/kW/yr respectively

[4] Open cycle gas turbine