Lords Grand Committee
7 July 2026
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Lords Grand Committee House of Lords
00:07 - 00:16
Speaker 1
The Electricity Capacity (Amendment and Transitional Provision) Regulations 2026. Lord Whitehead.
00:16 - 03:21
Speaker 3
My Lords, I beg to move that the Grand Committee consider the draft Electricity Capacity (Amendment and Transitional Provision) Regulations 2026, which was laid before the House on the 14th of May 2026. This instrument seeks to make technical improvements and changes to the capacity market, the government's main tool for ensuring security of electricity supply in Great Britain. Before I turn to the provisions in detail, may I first outline some background to the capacity market. Great Britain's capacity market was introduced in 2014 and is designed to maintain security of electricity supply by ensuring that sufficient electrical capacity is available to meet future demand predictions. Through auctions held annually, one year and four years ahead of delivery, the capacity needed to meet future peak demand under a range of scenarios is secured based on advice from the National Energy System Operator, NESO.
Participants secure agreements through these auctions, requiring them to make capacity available at times of system stress. It is a technology-neutral scheme that pays providers for making capacity available when needed, covering generation, storage, consumer-led flexibility, and interconnection. And since its introduction, the capacity market has contributed to investment in around 20 gigawatts of new capacity needed to replace older, less efficient plants as we transition to meet our Clean Power 2030 target. To ensure that the capacity market continues to function effectively, we regularly amend the implementing legislation based on what is required to best ensure continued security of electricity supply. Now, my Lords, let me now turn to the detail of the instrument.
This draft instrument amends 11 regulations and introduces one new regulation in the Electricity Capacity Regulations 2014, amends two regulations in the Electricity Capacity (Supplier Payment etc.) Regulations 2014, and revokes one chapter of the Electricity Capacity (No. 1) Regulations 2019. The draft instrument will ensure that assets awarded a contract for difference, or a CFD, following a direction from the Secretary of State, will be allowed to participate in the capacity market until the start of the asset's CFD support. This will better align the capacity market with our Clean Power 2030 ambition and ensure a smooth transition from payments under the capacity market to a CFD. This draft instrument will strengthen delivery assurance by increasing termination fees and credit cover to restore their value broadly in line with 2016 levels in real terms.
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