GB capacity market T-4 auction: results review

GB capacity market T-4 auction: results review

This year’s T-4 capacity market auction cleared at a high price of £60/kW/yr. Although lower than the previous two years, the price is still very high by historical standards when compared with years prior to those. The auction was also notable for a number of gas-fired units securing contracts as refurbishing units category, with EP’s Langage and one of EP’s two South Humber units securing 15 year contracts for 1.3GW in aggregate.

We run a further analysis of the units that secured contracts with breakdowns by technology and qualification status.

Capacity market auctions

The GB Capacity Market is a mechanism introduced by the government in 2014 to ensure continued security of supply as more volatile and unpredictable renewable generation assets come on stream. During the delivery year(s), capacity providers will receive payments for their agreed obligations at the auction clearing price profiled monthly. Providers are expected to be available to respond with their agreed generation volumes or load reductions when called on by National Grid at times of system stress. In the T-4 auction, potential Capacity Market participants can bid for contracts in auctions held four years ahead of the delivery year. By contrast, to the T-1 auction, in the T-4 auction, multi-year agreements can be awarded up to 15 years in length for units that meet applicable capital expenditure thresholds3.

The auctions follow a descending clock format, starting at the Price Cap of £75/kW/yr and have a £5/kW/yr price decrement separating the round cap and round floor in each round of the auction until the auction clears. The minimum price specified by the Applicant at which they would seek an agreement is known in the auction as an Exit Bid. “Price Makers” can submit Exit Bids at any price in the Auction, “Price Takers” can only submit exit bids that are equal to or below the Price Taker Threshold which is currently set at £25/kW/year.

Target capacity for 2028/29 T-4 auction

From the ~44.7GW of de-rated capacity that entered this year's auction, ~43.1GW secured contracts against a target of ~43.7GW4. The T-4 Capacity Market Auction for delivery year 2028/29 concluded in three rounds of bidding with a clearing price of £60.00/kW/year. The auction cleared at a lower price than the previous two auctions which cleared at £65/kW/yr and £63/kW/yr /kW/yr in 2027/28 and 2026/27 delivery years, respectively.

Gas-fired units

27.3GW of gas-fired capacity were awarded contracts, a decrease from 28.7GW which were awarded contracts the previous T-4 auction. Of the total awarded capacity, 88% were from existing generating CMU assets, 11% from refurbishing CMUs and the remaining capacity from new build assets. Existing CMU capacity has decreased from 33.2GW in the 2024 T-4 to 29.4GW in the 2025 T-4 auction. Conversely, refurbishing CMU capacity has risen significantly compared to the 2024 T-4 auction, increasing from 0.2GW to 2.9GW. The Calon units, Sutton Bridge and Severn Power 10, entered the T-4 auction as refurbishing units with 1.2GW of de-rated capacity having already secured contracts in this year’s T-1 auction. Severn Power 20 had also entered, but had not secured a contract in the T-1 auction. The Calon units had entered the auction as refurbishing CMUs and all managed to reach 1 year agreements in this year’s T-4 auction.

In total, 1.6GW of de-rated capacity did not secure a capacity market contract. Most notably, Humber Power Station 1 which entered as a Refurbishing Generating CMU but failed to secure an agreement for 0.7GW, equating to 45 % of the total de-rated capacity that did not secure a contract.

From the 27.3GW of gas-fired capacity that were awarded contracts, 21.5GW came from combined cycle gas turbine (CCGT) equating to 79% of total awarded gas-fired capacity. This was spread across 41 assets with Seabank (1.1 GW), Peterhead 1 (1.1GW), and Spalding CCGT A (0.9GW) emerging as the largest winners in capacity terms. 4GW capacity was awarded to 70 Combined Heat and Power (CHP) assets, closely followed by Open Cycle Gas Turbine (OCGT) & Reciprocating engines coming in at 1.2GW and 0.6GW respectively.

Battery Energy Storage System (BESS) units

In total, 2.0GW of de-rated battery storage capacity entered the auction with >90% (~1.8GW) securing contracts. 98.5% of battery storage capacity that secured contracts in the T-4 were new-build assets, winning contracts up to 15-year’s duration. De-rating factors for 1 - 2hr battery storage have increased by 36% on average from last year’s auction, meaning BESS assets will be paid more per unit of de-rated capacity compared to last year’s T-4 auction even though the clearing price is slightly lower than last year.

Interconnectors

In total, 6.8GW of de-rated interconnector capacity entered the auction with all units securing a contract. IFA and North Sea link interconnectors comprised 2.2GW of de-rated interconnector capacity. Greenlink, the latest connection between GB and I-SEM, had entered the auction with a nominal capacity of 500MW but a derated capacity of 272MW. Greenlink had previously secured a contract in the 2025 T-1 auction for 247MW, indicating a smaller derating factor than it received for the corresponding T-4 auction.

Nuclear

The only nuclear capacity entered in the auction were the two Sizewell units which were each successful in securing contracts for 463MW. (Other units in the nuclear fleet had participated in and been successful last week’s T-1 auction).

Details of significant units.

Notable CMUs that secured T-4 contracts are listed below:

Notable CMUs that did not secure T-4 contracts are listed below:

This year's T-4 auction saw notable shifts in awarded capacity, with strong gas-fired participation, growing battery storage contracts, and full interconnector success.

Notes:

1. Under the market rules, de-rating factors are applied to nominal unit capacity to reflect expected performance levels. Derating factors are set by generation technology class or, in the case of interconnectors, according to interconnected country.

2. The nominal target set for the auction applies at the price of £49/kW/yr (the Net Cost of New Entry (CONE). The target at the cap price is set at 1.5GW lower than the nominal target. The target at the floor of £0/kW/yr is set at 1.5GW than the nominal target. The actual volume procured in the auction therefore depends on the price at which the auction clears.

3. The capital expenditure threshold for 3yr contracts is £170/kW and for 15yr contracts is £340/kW.

4. The nominal target set for the auction applies at the price of £49/kW/yr (the Net Cost of New Entry (CONE). The target at the cap price is set at 1.5GW lower than the nominal target. The target at the floor of £0/kW/yr is set at 1.5GW than the nominal target. The actual volume procured in the auction therefore depends on the price at which the auction clears.