Kibo Energy PLC (LON:KIBO) said the first flexible power plant it developed has prequalified for the auctions to a win up to a 15-year capacity market contract under the UK government's reserve power scheme.
Kibo’s 60% MAST Energy Developments subsidiary has been created, in partnership with Italian firm AB Group, to focus on building power plants for this market.
Bordesley Power, MAST’s first “shovel ready” project site, has conditionally prequalified for the 2022 three years (T-3) ahead capacity market auction and the 2023 four years ahead (T-4) auction.
This week, the European Commission announced that the UK capacity market was compatible with European Union state aid rules, allowing the government to make capacity payments to contracted energy generators.
The capacity market aims to ensure the security of electricity supply when it is needed, with energy providers paid monthly payments for their agreed obligation at the auction clearing price, with agreements ranging between one and 15 years.
Kibo chief executive officer Louis Coetzee said: “The reinstatement of the capacity market scheme is recognition by the EU and UK government that there is a need to ensure the security of electricity supplies in the UK.
He added that this means that “the economics of flexible generation sites such as Bordesley improve, as it facilitates a steady payment for the duration of the capacity agreement”.
Capacity market prices should recover, according to research by Aurora Energy Research, which expects prices next year to clear in mid £20s per kW, though the buildout of nuclear, wind and interconnectors remain uncertainties in the market.