IN Brief:
- Ofgem’s eleventh Capacity Market operating report covers the delivery year running from October 2025 to September 2026.
- The 2026 T-1 auction procured 7.19GW at £5/kW/year, while the T-4 secured 40.11GW at £27.10/kW/year.
- New procurement parameters and proposed delivery rules will shape the next auction cycle as the technology mix continues to broaden.
Ofgem has published its eleventh annual report on the operation of Great Britain’s Capacity Market, covering the delivery year from 1 October 2025 to 30 September 2026 and the two capacity auctions held during the period.
The report examines the T-1 auction securing additional capacity for the 2026/27 delivery year and the T-4 auction procuring capacity for 2029/30, alongside prequalification and Ofgem’s observations on operation of the mechanism. Generation, storage, interconnection, and demand-side response all sit within a market designed to secure dependable capacity rather than electricity output during normal trading periods.
The T-1 auction concluded on 4 March and procured 7,192.317MW across 195 Capacity Market Units. It cleared at £5/kW/year against a final target of 6.3GW, providing additional capacity alongside agreements already secured for the 2026/27 delivery year.
The T-4 auction followed on 10 March, securing 40,108.608MW across 691 Capacity Market Units for 2029/30. Its clearing price was £27.10/kW/year against a final procurement target of 39.4GW.
Both auctions therefore secured more capacity than the final central targets, reflecting the operation of the demand curves around those figures rather than a requirement for procurement to stop at one fixed quantity. The government had set maximum capacity at zero price at 7.3GW for the T-1 auction and 40.9GW for the T-4.
The two auctions serve different parts of the adequacy process. T-4 procurement gives existing generators and prospective projects forward visibility several years before delivery, while T-1 procurement adjusts the position closer to the delivery year as forecasts, project availability, and expected non-delivery become clearer.
Successful Capacity Market providers receive payments for committing dependable capacity during system stress events. Their contribution is assessed through de-rating rather than raw nameplate capacity because different technologies have different probabilities of being able to deliver when electricity supply is tight.
Battery storage has made that calculation more prominent as the fleet expands. A battery can deliver full rated power very quickly, but the period for which it can sustain that output depends on its stored energy and state of charge. A 100MW battery capable of running for one hour does not provide the same adequacy characteristic as a 100MW resource able to remain available for several hours.
Interconnectors require a different assessment. Their physical cable capacity is known, but imports during a British stress event also depend on conditions in the connected market. De-rating is therefore intended to represent the dependable contribution expected from an interconnector rather than simply its maximum electrical transfer rating.
The current auction cycle arrives as the government continues to adjust the mechanism. A consultation on Capacity Market delivery rules is considering stronger testing, more stringent data requirements, revised demand-side response arrangements, and changes to secondary trading ahead of later prequalification rounds.
DESNZ has also opened its annual review of emerging Capacity Market technologies. The exercise considers whether new resources have operating characteristics sufficiently different from established technology classes to justify separate treatment and de-rating assumptions.
That question becomes harder as conventional generation is joined by longer-duration batteries, flexible computing loads, hybrid assets, aggregated demand response, and increasingly sophisticated control systems. Capacity is useful only to the extent that its operating limits can be translated into a defensible probability of delivery during a stress event.
The next auction parameters have already been established. For delivery in 2027/28, the initial T-1 target is 5.0GW, while the T-4 auction for 2030/31 has an initial target of 40.9GW. Both continue to use the three-hour Loss of Load Expectation reliability standard.
The T-4 parameter also includes technology-specific interconnector de-rating factors, another indication that the Capacity Market now has to represent a considerably more complicated electricity system than one based predominantly on dispatchable domestic generation.
Price movements from one auction to another should consequently be read alongside the quantity and composition of capacity entering the process. A lower clearing price may reduce the immediate cost of the agreements secured, but it says little by itself about whether an individual project will reach operation or remain available throughout its delivery obligations.
Ofgem’s annual report provides the regulatory record of that process rather than a forecast of future security of supply. The more demanding test comes during delivery years, when contracted megawatts have to correspond with generating plant, storage, interconnection, and flexible demand capable of responding under the conditions for which the Capacity Market exists.
