Capacity Market: proposals to integrate low carbon technologies and enhance delivery assurance ahead of Prequalification 2026
Source: gov.uk (2025-12-02)

We are seeking views on proposed changes to the Capacity Market (CM) for Prequalification 2026.

The Capacity Market (CM) is regularly reviewed to ensure it remains fit for purpose, reflects changing market conditions and that the CM Rules ensure effective delivery and encourage participation to create competitive auctions.

The government has recently published a consultation (https://www.gov.uk/government/consultations/capacity-market-proposed-changes-for-prequalification-2026) on proposed changes to the Capacity Market Rules and Regulations. Alongside this, a set of urgent reforms has been identified that require changes to the Capacity Market Rules and Regulations before the upcoming Auction Prequalification round commencing in July 2026, ahead of auctions in 2027.

The consultation seeks views on the following areas:

1. Managing the transition of Existing Generating Capacity Market Units (CMUs) into alternative schemes: Ensuring that where a Contract for Difference (CfD) has been awarded following a Secretary of State direction, the relevant Generating Unit can continue participation in the CM, without allowing support from both schemes to be received at the same time. This would ensure value for money for consumers and would allow existing capacity to continue participating in the scheme. The change recognises the strategic important of these assets for the UK’s energy transition and to Security of Supply.

2. Long Duration Electricity Storage Cap and Floor (LDES C&F): Capturing the interaction between the LDES C&F and the CM by proposing CM eligibility criteria for participating LDES Cap and Floor projects. The proposals consider where any adaptations to existing CM Rules and Regulations are necessary. Proposals include mitigations to avoid market distortions and address access to mechanisms through which projects can delay becoming operational relative to CM auctions in which they participate.

3. Improving Delivery Assurance: Strengthening the CM delivery assurance framework by proposing two approaches to making the termination framework in the CM more stringent. In addition, a proposal to hold Credit Cover until a New Build CMU has completed commissioning their CMU to further incentivise Capacity Providers to build their CMUs and fulfil their obligations. It is important to strengthen the delivery assurance of new build assets in the scheme to ensure it continues to deliver on its primary objective of ensuring the security of Great Britain’s electricity supply, while also maintaining value for money for consumers.

4. Clarifying Rules around Secondary Trading entrants and CMU transferors: Updating the CM Rules around Secondary Trading, which is the CM’s mechanism which allows for the transfer of CM agreements and capacity obligations for all or part of a Delivery year to an Acceptable Transferee. The change intends to provide greater certainty on the eligibility criteria for Applicants who wish to obtain Capacity Agreements through the scheme’s Secondary Trading process. The proposal also aims to improve the clarity of the Rules.

5. Introducing additional measures to support eligibility for the Multiple Price Capacity Market (MPCM see consultation published on 2 October - Capacity Market: proposed changes for Prequalification 2026 (https://www.gov.uk/government/consultations/capacity-market-proposed-changes-for-prequalification-2026)): This will ensure eligible capacity provides genuinely new capacity and offers value for money. This includes a new requirement to meet a higher capital expenditure (CapEx) threshold in order to qualify for the second, higher price cap.

The consultation is open to anyone to respond to but will be of particular interest to:
- energy industry
- consumer groups
- academia
- think tanks
- other organisations who have an interest in security of supply and decarbonisation
Read our consultation privacy notice (https://www.gov.uk/government/publications/desnz-consultations-privacy-notice/privacy-notice-relating-to-consultation-responses-received-by-desnz).