Consultation outcome

Government response on new generating technologies for the future Capacity Market

Updated 30 November 2023

On 29 September 2023 we published our annual open letter inviting stakeholders to share their views by 1 November, as to whether any new generating technologies which can contribute to security of supply, and which are not already identified as a Generating Technology Class (GTC), should be eligible to participate in future Capacity Market (CM) auctions (‘the open letter’).

We received 6 responses from stakeholders to our open letter. We are grateful to these stakeholders for providing comprehensive responses to the open letter.

Three of the respondents provided updates on the proposed inclusion of Vehicle-to-X (V2X, where X could represent the home, a building or the grid) technology in the CM and the potential of V2X to contribute towards capacity adequacy. V2X is an emerging technology wherein electric vehicles discharge their power to another source. Two of these respondents suggested that, if electric vehicles were to participate in the Capacity Market, it would be appropriate for V2X to be categorised separately and receive an individual de-rating factor (DRF).

One respondent noted that V2X technology was still developing and that its deployment to the required scale by 2025 was ambitious unless various technological and policy barriers were addressed. The respondent suggested these barriers could be addressed by increasing uptake in V2X charging, by enacting retail reforms to further enable the introduction of smart tariffs, and by implementing market-wide half-hourly settlement periods. The respondent noted that the outputs of the  V2X Innovation Programme could address some of these deployment barriers and help commercialise V2X technology, for example through the rollout of dynamic charging technology with Combined Charging System (CCS) cables and through the collection of EV fleet charging volume and duration data.

A second respondent also highlighted that a barrier towards V2X participation in the CM is charging technology and suggested that UK charging standards should be updated to reflect international market conditions. This respondent also commented upon the capacity of electric buses, and how in their view, should the technology be in place, electric bus fleets could contribute significantly towards security of supply through V2X participation. However, their response acknowledged that electric vehicle fleet operators typically avoid charging at peak demand due to high energy costs and therefore there was a risk of electric vehicle batteries being empty at times of peak demand, thus impacting their ability to participate in V2X. Moreover, in the event electric vehicles intended for public transport were sufficiently charged, they may not be available to discharge to the grid during times of peak demand if they are in use at the same time, for example during the typical post-work commute.

A final respondent highlighted barriers to the development of this technology, including high equipment costs, difficulty entering the regulated energy system, and the small number of EVs currently able to participate in V2X. This respondent highlighted that some of the barriers to V2X projects could be improved with access to additional revenue streams such as the CM.

On 16 October, government opened a consultation on Phase 2 proposals of the Capacity Market and its Ten Year Review. Section 6.4 of this consultation addresses domestic Demand Side Response participation and section 6.6 is a call for evidence for the creation of new Demand Side Response generating technology classes. V2X and other DSR technologies will be discussed in the government response to this consultation.

One respondent provided an update on the proposed inclusion of Offshore Hybrid Assets (OHAs) within the CM. This respondent noted that two MPI projects, (linking GB with Belgium and the Netherlands respectively) were recently designated pilot projects by Ofgem under their Multi-Purpose Interconnectors Pilot Regulatory Framework. The respondent noted that the Capacity Market could provide an important revenue stream for these assets, and their eligibility to participate in the CM would impact any investment decisions made.

Finally, two further respondents suggested different emerging technologies that could participate in the CM. One respondent suggested that smart transformers could participate in the CM by acting as a demand reduction technology - by reducing voltage offtake in the system. The other respondent suggested that hydrogen to power assets should be included as a generation technology in the CM. 

We will continue to consider these emerging technologies with the ESO, and how best to address the concerns raised in the responses received. We will assess the potential availability of these technologies into contributing towards electricity supply and any future participation in the CM.

We will use this annual open letter process to continue our engagement with stakeholders on the progress of participation of new generating technologies. The next annual letter will be published in Autumn 2024, and we will welcome any further responses towards new generating technologies in the Capacity Market to this letter.

Capacity Market Team
The Department for Energy Security and Net Zero