The Energy Transition | T-1 Capacity Market auction preliminary results

This week we look at the results of the T-1 Capacity Market auction, funding for floating offshore wind, consultation on Power Station access and the North Sea's clean energy future.

Record capacity awarded at lowest clearing price in T-1 Capacity Market auction

The National Electricity System Operator (NESO) has published the preliminary results of the year-ahead (T-1) Capacity Market (CM) auction for the 2025/2026 delivery year.

The T-1 auction is one of two CM auctions run by NESO to ensure electricity supply security by providing a payment for reliable sources of capacity. Up to 95% of expected capacity is procured four years ahead of the delivery, under the T-4 auction (to be held next week); the T-1 auction is held one year ahead of delivery, as a top-up to allow for any last minute adjustments required for meeting capacity requirements.

The T-1 auction cleared on 5 March at £20.00/kW/year, which is around 45% lower than last year's price and the lowest clearing price for five years. This marks a continuation of the trend of declining prices since their peak at £75/kW/year in 2022.

Just over 7.9GW of de-rated capacity was procured in this year's auction, surpassing the target of 7.5GW. This represents the highest ever total for the CM, beating last year's total of 7.7GW. Of the 727MW of procured new-build generating capacity, the majority (560MW) came from battery storage.  A further 160MW of existing storage was awarded agreements, meaning batteries won a record volume in this year's auction, and will provide the third-most capacity by technology type.

The winning capacity also included:

• 3.63GW of nuclear generation;
• 2.37GW of gas generation (the majority of which is existing generation);
• 662MW of Demand Side Response;
• 247MW of interconnector generation;
• 116MW of offshore wind generation;
• 46MW of onshore wind generation;
• 26MW of solar generation;
• 76MW of energy-from-waste generation; and
• 6.7MW of diesel generation.

Enhancing transparency and consistency in power station access: Grid Code Modification GC0117

Ofgem has published a consultation on its minded-to decision to approve regulatory changes aimed at delivering an engineering proposal to improve the transparency and consistency of access arrangements for power stations.

The original proposal for Grid Code Modification GC0117 aims to establish a set of requirements for power station connections across Great Britain. Under the current system, three power station thresholds (small, medium and large) apply to generator connections in Great Britain. These existing arrangements define the technical and contractual requirements for generator connections depending on which of the three thresholds is applicable and where the connection is.

The proposal seeks to simplify these arrangements by reducing the number of thresholds from three to two, defining large power stations as those with a registered capacity of 10MW and above, and small ones as those below 10MW. In doing so, it aims to harmonise the connection process and operational requirements across all Transmission Owner licence areas, ensuring a consistent approach for new power station connections. This addresses the industry concern about the lack of consistency of access and connection arrangements.

Ofgem states that the proposed changes are expected to bring several benefits to the energy sector, including:

• increased transparency resulting from the standardisation of access arrangements;
• improving system operability; and
• potentially, a reduction in administrative costs for power station operators, making the process more cost-effective.

Ofgem does not intend to implement the proposal retrospectively. If it is approved, generators would only be affected if they are embedded power stations with a registered capacity of 10MW and above and which:

• applied for a connection agreement or a modification application on or after the implementation date;
• concluded purchase contracts for their main plant and apparatus on or after 1 June 2027.

The consultation is open until 11 April 2025. Ofgem is requesting that interested parties send feedback on the consultation to engineers@ofgem.gov.uk.

Government consults on the North Sea’s clean energy future

The government has launched a consultation on potential investment in the North Sea, including supporting oil and gas workers to transition into clean energy and other industrial strategy sectors, and  managing the upstream oil and gas sector to ensure oil and gas production in the North Sea can support Great Britain's climate obligations.

The government states that its overarching objective for the North Sea's energy future is "to foster an internationally-leading offshore clean energy industry, which ensures good, long-term jobs, growth and investment in communities  across the North Sea, in tandem with a sustainable transition in oil and gas – boosting the country’s economy and energy security, in line with our climate obligations."

The consultation focuses on two key strands to deliver this objective:

1. Plans to invest in the North Sea's future.

This area of the consultation considers long term investment in the North Sea. The government is seeking views on plans to accelerate investment in net zero and other sectors (including hydrogen and carbon capture use and storage) across the North Sea. The government is also inviting feedback to aid understanding of where transferable skills exist, and how they can be utilised across clean energy sectors, to enable oil and gas workers to transition into clean energy jobs. The aim here is to support workers, supply chains and communities through the energy transition, including through the creation of jobs for oil and gas workers, so as to ensure that the oil and gas industry and its workers can take advantage of the net zero trajectory.

2. Setting a global standard approach to oil and gas production in conjunction with a commitment to net zero.

The consultation also explores how best to manage production in accordance with climate commitments, by maintaining existing fields and continuing ongoing domestic production, while expanding clean technologies and protect the country’s energy security in the process. In order to explore the regulatory approach to oil and gas production, the government is seeking views on the detail of the government’s commitments on licensing and proposed changes to the North Sea Transition Authority’s principal objective and powers to ensure that the regulatory regime supports these objectives.

Additionally, the government has confirmed that the Energy Profits Levy will end in 2030 and it is currently consulting on what a new regime could look like to respond to any future shocks in oil and gas prices.

The consultation period will last eight weeks, ending on 30 April 2025. Interested stakeholders should send responses to northseaenergyfuture@energysecurity.gov.uk or respond online.

Floating offshore wind project granted UK government funding

The Department for Energy Security and Net Zero (DESNZ) has announced over £55 million for the expansion of the Port of Cromarty Firth in Scotland to support the floating offshore wind industry. The government has stated that this funding "will make it the first port able to make floating offshore wind turbines on site and at scale in the UK."

The government's intention is that this funding, which has come through the Floating Offshore Wind Manufacturing Investment Scheme (FLOWMIS), will pave the way for the port to secure further private investment. The government expects the expansion project to create up to 320 jobs and estimates that up to 1,000 skilled workers will be needed once the port is fully operational.

FLOWMIS was established in 2023 to provide funding for the development of port infrastructure required to deploy floating offshore wind at scale. The government selected two ports (including the Port of Cromarty Firth) for funding in March last year, and has stated that plans for the second port, Port Talbot, are under development.

Alex Campbell, Chief Executive of Port of Cromarty Firth, said:

"We believe this confirmation by the UK government shows the faith in our Trust Port status to deliver jobs and economic growth locally and nationally, and that the certainty from this announcement will unlock further investment in other Ports across the Inverness and Cromarty Firth Green Freeport to boost their complementary plans."

This article was written with the assistance of Rosie Shaw, trainee solicitor, and Tomi Agbonifo, paralegal, and Sumaiya Hafiza, solicitor apprentice.