Capacity Market: proposed changes for Prequalification 2026

The Capacity Market is at the heart of the government’s strategy for ensuring security of electricity supply in Great Britain. It was first introduced in 2014 as part of the Electricity Market Reform programme to support investment in capacity and deliver value for money for consumers. Existing and new build electricity capacity providers compete to obtain Capacity Market Agreements under which they commit to deliver capacity when needed, in return for guaranteed regular payments.

The proposals in this consultation aim to reform the Capacity Market to ensure continued security of supply, align the scheme with the government’s decarbonisation goals, and improve the functionality of the scheme. The consultation seeks views on the following areas:

1. Multiple price Capacity Market – Implementing targeted price-related reforms to ensure security of supply is cost-effectively maintained. This will be achieved by introducing a second, higher, price cap into the auction that could, if needed, secure new build dispatchable enduring capacity that can generate power over prolonged periods of tight supply.
2. Ensuring efficient bidding in Capacity Market auctions – A package of interventions to reduce information provided to participants before and during auctions that will increase uncertainty relating to the expected gains and losses from bidding strategically and thereby ensure efficient bidding that maximises value for money.
3. Consumer-led flexibility - Implementing additional delivery assurance processes in relation to consumer-led flexibility assets entering the Capacity Market, both from an operations perspective and the Capacity Market value attributed to diverse consumer-led flexibility technologies in providing system response.
4. Self-nomination of connection capacity for battery storage technologies – Allowing battery Capacity Market Units to self-nominate their connection capacity below their full network connection capacity to mitigate the risk of failing extended performance testing due to degradation.
5. Determining appropriate means for non-fossil fuel generation to access low carbon Capacity Market mechanisms - Introducing appropriate sustainability criteria for biogenic sources to evidence against, which could enable them to access low carbon benefits in the Capacity Market.
6. Further improvements to Capacity Market administration and delivery assurance – Ensuring clarity of the Rules by proposing policy clarifications, amendments and revocations, as well as introducing a Termination Fee for Termination Events that currently have no fee associated. These proposals also seek to improve value for money by suspending payments for Capacity Market Units that are subject to an Insolvency Termination Event.

The consultation is open to anyone to respond to, but will be of particular interest to:

• energy industry
• consumer groups
• academia
• think tanks
• other organisations who have an interest in security of supply and decarbonisation

Read our consultation privacy notice.