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The Domestic Gas and Electricity (Tariff Cap) Bill requires that, in setting the price cap, Ofgem have regard to, among other things, the need to ensure an efficient supplier’s ability to finance its supply activities. The price cap does not cover generation and therefore will not impact on security of supply.
The Capacity Market is at the heart of the Government’s plans for a reliable energy system, and is providing the right investment incentives for a mix of secure electricity capacity in the UK. Following four successful main auctions, and the early auction, the Capacity Market has already secured the bulk of the electricity we need from the current winter through to 2021/2022.
The design of the Capacity Market drives fierce competition, creating good value outcomes for consumers. The latest auction cleared at only £8.40/kW, making it the cheapest main auction so far.
For gas, the UK benefits from a highly diverse and flexible system of supply sources, including indigenous production, imports from Norway and the continuent, storage and liquefied natural gas imports, all of which contribute to a diverse and liquid market which is responsive enough to meet demand even during periods of extreme weather.