Government confirms demand response participation and delivery assurance changes to the Capacity Market
The Department for Energy Security and Net Zero (DESNZ) published its consultation response to proposals to enhance consumer-led flexibility – CLF – on 2 June. In doing so, it confirmed several changes in relation to improving participation and assuring delivery of CLF, also known as demand-side response, or DSR.
The most significant of these changes is the addition of a £5,000/kW termination fee for Unproven DSR Capacity Market Units (CMUs) that fail to obtain a DSR Test Certificate. For Unproven DSR, this process takes place after the auction but ahead of the first delivery year. It’s where a provider proves that the DSR CMU can deliver the response it’s contracted for.
The fee will apply to both T-1 and T-4 agreements, with implementation for agreements secured from auctions in 2026 and beyond. The Government’s rationale is to provide an incentive for DSR providers to fulfil capacity obligations while avoiding an excessive barrier to entry.
The Government will also introduce a separation stage between the DSR Test Period and notifying DSR components as well as metering assessments and tests. This means providers need to allow for a defined amount of time between the different stages of DSR testing and approval, allowing more time for processing and administration. This is 10 working days for T-1 auctions and 20 working days for T-4 auctions.
DESNZ also plans to simplify the application process, so it’s possible to avoid duplicating information across components by collating it under a single line entry.
Wider changes
In addition, the Government proceeded with several wider CM rule changes, including housekeeping and the removal of unnecessary chapters and rules. One of the most impactful for DSR is the clarification that a Generating Technology Class (GTC) cannot be changed once a unit has prequalified through the Delivery Body amendment process. Some respondents argued there should be no ‘like-for-like’ substitution requirement for DSR components, as these will invariably change. Others argued that storage, DSR, and Vehicle-to-Grid (V2G) chargers should be exempt. While the Government proceeded with its proposed position, it also said it would consider the range of views from the consultation on the change impacting DSR CMU flexibility.
The Government also plans to implement a change allowing providers to submit a Low Carbon Declaration after an auction has taken place, to support secondary trading.
It will complete the changes in advance of the 2025 Prequalification window.
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