The Capacity Remuneration Mechanism (CRM) is designed to ensure that the demand for electricity is always met. The overall aim of the CRM is to ensure security of supply, as well as ensuring that consumers don’t pay for more capacity than is needed. The CRM was implemented as part of the revised SEM arrangements which went live on 1 October 2018, and replaced the Capacity Payment Mechanism under the previous arrangements.
Capacity providers sell qualified capacity to the market, based on generation capacity required in a future capacity year. This takes place in the form of capacity auctions. Auctions are normally held by the Transmission System Operators between one and four years ahead of delivery.In order to sell capacity in a Capacity Auction, participants are required to submit a bid(s) that specify the amount of capacity (MW) being offered and the price sought for that capacity (£/€). Bids submitted into an auction are arranged from lowest to highest price until the capacity requirement for the specific capacity year is satisfied. The level of capacity required is assessed by the Transmission System Operators. Capacity that has been bid in at or less than the last bid price clears the in the auction and is paid this market clearing price. Capacity that has been bid at more than the market clearing price is deemed to have failed to clear the auction and therefore is not paid, unless the capacity is needed to meet a local security of supply need.
Capacity providers who are successful in a capacity auction receive a regular capacity payment. This payment assists with funding generation capacity. In return, successful participants have an obligation to refund consumers for any energy prices which rises above a set strike price for each capacity auction.
Capacity auctions to date
The Transmission System Operator publishes the results of all auctions on the SEMO website. The summary results of all auctions are provided below:
- T-1 CY 2018/19
- T-1 CY2019/20
- T-4 CY 2022/23
- T-1 CY2020/21
- T-2 CY 2021/22
- T-4 CY 2023/24
- T-4 CY 2024/25
A further breakdown of all CRM auction results can be found on the SEMO website.