How we work out capacity market income per site
The capacity market pays plant to exist, so that the country has enough of it available on the worst winter evening. It is the third of the four ways a battery earns, and unlike trading it is published. This is how we turn what is published into a figure per site, and the four places where it can go wrong.
What is published, and where
| Input | Source | Status |
|---|---|---|
| Which units hold an agreement, and for which years | Capacity Market Register | measured |
| De-rated capacity each agreement pays on | Capacity Market Register | measured |
| The price each auction cleared at | NESO auction results | measured |
| Which agreements have been terminated | Capacity Market Register | measured |
| Where the site physically is | Ordnance Survey grid reference | measured |
| Which mapped battery an agreement belongs to | nowhere | matched |
The calculation
- Take every agreement marked as a storage facility, awarded, and not terminated.
- Drop pumped hydro. More on that below, because it is the trap.
- Read the delivery years each agreement is valid for. A fifteen year agreement awarded years ago is still being paid now.
- Price it at the auction that awarded it, not at the current auction. An agreement from 2020 is paid the 2020 price.
- Multiply the de-rated obligation in kilowatts by that price.
- Apportion by days. A delivery year runs October to September, our window does not, so the window straddles two delivery years and each is counted for the days it actually covers.
The trap, and how much it was worth
The register marks pumped hydro as a storage facility, which it is. It is not a battery, and it is enormous. Six Dinorwig units at 274 megawatts each, four at Cruachan, two at Foyers, two at Ffestiniog.
Our first run of this calculation returned £140m. Once pumped storage was taken out it returned £62.7m. More than half the number was somebody else's mountain. Great Britain has four pumped storage stations, so they are excluded by name rather than by a rule, and the names are in the code where anyone can check them.
Four things we know are wrong with it
One. The figure is a floor, not the cash. Capacity market payments are uprated for inflation from the price base the auction was set in. An agreement from the 2020-21 auction is paid more today than the price it cleared at. We publish the cleared price because the uprating rule, which index and which reference month, is not something we have verified. Every capacity market figure on this site is therefore lower than the real payment, and by more for older agreements.
Two. A third of the money cannot be attached to a mapped site. The capacity market register and the balancing data share no identifier at all, so the match is on coordinates, corroborated by name. Within 900 metres the coordinate carries it. Beyond that, up to five kilometres, it needs a distinctive shared word, and "energy" or "limited" is not distinctive. Of £62.7m, we can place £42.0m on 118 sites. The rest is described below rather than quietly dropped.
Three. Payments are not guaranteed. An agreement can be suspended, and capacity can be traded away between parties. We read the termination flag and drop terminated agreements, but we do not yet follow secondary trading, so an obligation that has changed hands is still credited to the original holder.
Four. De-rating is not duration. The de-rated capacity is what the agreement pays on, and it reflects how long a battery can run as much as how big it is. It is not the site's power rating and should not be read as one.
What the unmatched money turned out to be
Most of it is not a matching failure. It is 55 battery sites holding 663 megawatts of de-rated agreements and taking £15.2m that appear in neither the balancing mechanism nor the reserve auctions. Nothing else about them is published, so they are not on our map. The capacity market is the only place they show up at all.
That is worth saying plainly: our fleet of 217 assets is not the whole fleet, and the capacity market tells us roughly by how much.
Tell us we are wrong
If you hold one of these agreements and our figure for your site is wrong, or we have attached it to the wrong place, that is the most useful message we could get. Say which unit and what it should be.