1. Overview

Changes to the electricity market mean that there are risks to the future security of electricity supplies. Government has therefore legislated to introduce a Capacity Market. The Capacity Market will provide an insurance policy against the possibility of future blackouts by providing financial incentives to ensure that there is reliable electricity capacity to meet demand.

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The “Capacity Market” is a key component that forms part of the UK Government’s Electricity Market Reform (EMR) that is aimed at increasing resilience of the grid by allowing auction accredited independent generators (CMU) to deliver electricity on demand to the grid in return for financial incentives.

 

Picture Courtesy of Jenbacher Europe

A CMU is a unit of electricity generation capacity or electricity demand reduction that participates in the Capacity Market auction. Once that CMU has a participation agreement and as part of its post build obligations, certain criteria must be met in respect of its ability to meet its bilateral generation obligations. One of these obligations is related to Achieving Substantial Completion Milestone in the Capacity Market.

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2. Combined Heat and Power

The use of Combined Heat and Power cycle engines connected to generators are commonly used by the CMU’s. These machines use gas to power the engine and the output is electricity and thermal heat that can be used in district heating schemes such as Kings Cross. Large scale CHP can include engines in excess of 2MW.

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3. Capacity Market Agreement Milestones

All New Build CMUs and Refurbishing CMUs with a Capacity Agreement must in advance of or during the first Delivery Year of that Capacity Agreement make certain declarations to the Delivery Body else there may be an impact on the terms of the Capacity Agreement held. These are the appointment of an independent technical expert to provide a report to satisfy the process of verifying the achievement of a Substantial Completion Milestone.

Failure to follow the Capacity Market Rules in either of these areas could lead to a shortening of the Capacity Agreement or even termination of the Capacity Agreement.

The agreements demand a minima of 90% and above as de-rating factor, however if only 90% of the obligation is met, then the unit’s capacity obligation and hence capacity payments will also be reduced to this 90% value.

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4. Application using independent technical expert for milestone sign off

PA Energy London was appointed to act as Independent Technical Expert at a London located CMU with peak capacity of almost 10MW. The CMU is part of an international energy supply company. The CMU underwent a recent multi million £ refurbishment and the purpose of the appointment was to verify that the milestone conditions were met relating to the two new Combined Heat & Power units). The CMU participates in the Capacity Market as well as supply district heating thermal energy to prominent public buildings in the City of London through its network of underground pipework.

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A standard process is adopted by PA Energy London to assess whether the conditions of Substantial Completion Milestone have been met. This includes establishing a temporary working relationship with the CMU site representative for the purposes of the assessment exercise. This means understanding the recent history of the unit, CHP commissioning process outcomes as relate to energy generation, G59 test results, metering arrangement and the current operational status. Attending site to review the overall CHP installation in the context of the delivery of energy to the grid and the export metering arrangement form part of the verification by PA Energy London. 

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Capacity Market agreements are also reviewed to determine if the energy demand obligations have been met in accordance to the minimum 90% de-rated factor.

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Once the documentation has been reviewed and verification of the essential points, the CHP performance is studied which includes generation output metering data and highest metered peak generation; as a key component of the sign off.

Once the assessment has been made by PA Energy London, a backing report is produced to support the certification that is issued. This then forms part of the documentary submissions by the CMU to the Delivery Body and the Substantial Milestone Completion is met assuming all the necessary criteria is fulfilled.

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Credits: National Grid, Capacity Market and UK Government EMR