The Department for Energy Security and Net Zero has published a consultation seeking views on a series of proposed reforms to the Capacity Market for Prequalification 2026.
The consultation seeks views on six main areas:
- Multiple-price Capacity Market: the introduction of a second, higher price cap into the auction that could, if required, help to secure new build dispatchable enduring capacity.
- Ensuring efficient bidding in Capacity Market auctions: By reducing advance information to participants, thereby enhancing value for money.
- Consumer-led flexibility: Implementing additional delivery assurance processes in relation to consumer-led flexibility assets entering the Capacity Market.
- Allowing battery storage units to self-nominate connection capacity (below full network connection) to mitigate risk of failing extended performance testing.
- Determining appropriate means for non-fossil fuel generation to access low carbon Capacity Market mechanisms by introducing sustainability criteria to evidence against.
- Administrative and delivery assurance improvements to the CM Rules: Includes clarifications, termination fees, and payment suspension for insolvent units.
In particular, EMRS would like to highlight the following further information in relation to the reforms proposed in the consultation:
Multiple Price Capacity Market
- The government proposes introducing a Multiple Price Capacity Market (MPCM) to enable price differentiation within the Capacity Market.
- Under this model, a single T-4 auction would operate with two price caps, the standard £75/kW/yr and a higher cap for eligible new build, dispatchable, enduring capacity.
- The design includes an optional sub-target allowing the government to set a minimum volume of eligible capacity to secure when required.
Consumer-Led Flexibility
- The government proposes reducing reporting requirements for small assets below 20 kW and introducing DSR categories (generation, storage, demand turn-down).
- Testing requirements will be tightened so DSR units must demonstrate at least 50% of their capacity and complete tests promptly after component changes.
- Additional measures include updated de-rating methods and introduce a £15,000/MW Termination Fee (TF4) for false POSGU declarations.
Delivery Assurance
- The government proposes clarifying definitions and rules in the Capacity Market, including defining “waste” for Energy from Waste facilities.
- It seeks to clarify metering assessment timelines by specifying that the 10 working-day submission period begins after a completed Metering Assessment is provided.
- Other proposals include extending the prequalification window during severe EMR Portal IT failures, standardising Long Stop Dates for one-year Capacity Agreements to start at the Delivery Year’s outset, and aligning Supplier Payment Regulations with the MHHS settlement timetable.
Capacity Providers are encouraged to respond to any or all sections of the consultation. The deadline for responses is 5:00pm on 27 November 2025.
Your feedback is vital to ensuring that the Capacity Market continues to operate efficiently and remains fit for purpose for future Delivery Years.
Further information and details on how to respond are available on the DESNZ website.