Possible models for a capacity mechanism
Seeking views on a Strategic Reserve option and a market-wide mechanism offering incentives to providers willing to offer reliable capacity.
In the electricity market reform white paper, (Planning our electric future: a white paper for secure, affordable and low-carbon electricity, we committed to introducing a capacity mechanism to ensure resource adequacy - that is, to ensure there is sufficient reliable and diverse capacity to meet demand.
We consulted on 2 options: a targeted mechanism in the form of a Strategic Reserve (a development of the lead option from the December 2010 electricity market reform consultation); and a market-wide mechanism in which all providers willing to offer reliable capacity are provided incentives to do so.
On 15 December Government published Planning our electric future: technical update which forms the government response to the consultation, and sets out our decision to implement a market-wide Capacity Market. The technical update also provides a high level summary of responses to this consultation and includes a list of respondents at annex A. Individual responses are available in full.
The technical update is also accompanied by an impact assessment. We will continue to work closely with stakeholders during the detailed design phase from 2012.
Please see also the consultation on electricity market reform, which closed on 10 March 2011.