UK Power Auctions Forecasted to Cost £3 Billion
The recent auctions conducted by the UK Government for power generators have raised concerns among experts about the potential financial burden on UK billpayers, with predictions of the cost exceeding £3 billion to ensure electricity supplies.
In response to the Capacity Market T-1 auction results, Sam Hollister, Head of Energy Economics and Finance at LCP Delta, expressed apprehension about the significant costs involved. The auction secured £273 million to ensure electricity supplies in 2025, with expectations that the upcoming T-4 auction, targeting 44 GW of generation in 2028, could surpass last year's record-breaking prices of £63/kW, resulting in a cost exceeding £2.6 billion for that auction alone.
Hollister highlighted battery developers as major beneficiaries of the recent auction, noting that they will play a crucial role in supplying power to the UK when the system faces shortages. Additionally, EDF emerged as a winner, securing contracts for their nuclear plants with life extensions into 2025.
The unexpectedly high demand and delays or cancellations of planned assets contributed to the auction outcomes. Looking ahead to the T-4 auction next week, experts anticipate an increasingly challenging scenario due to power station retirements and rising electricity demand.
These developments underscore the complexities and challenges associated with ensuring reliable electricity supplies while transitioning towards cleaner energy sources and navigating market dynamics.
