Assessing the Benefits of Demand Side Response Participation in a Capacity Market

Project Overview

The introduction of capacity markets in the UK calls for evidence about what will qualify as capacity mechanisms and the levels of incentives required to make it happen. This feasibility study consists of a simulation of capacity markets in which demand resources are aggregated and dispatched in response to tightening capacity markets. On the one hand, the simulation has the technical characteristics of capacity markets. On the other hand, the assessment is based on a pilot Willingness to Accept study which will measure both the price per MW/h at which customers and aggregators will be willing to participate in a capacity market, and the market conditions for them to join in.


In the UK there is not yet a formal Capacity Market. Capacity Markets involve contracting the level of diverse capacity required to meet peak demand through a central auction. Thus, a true market-based solution to reliability remains to be constructed. Creating Capacity Markets could potentially contribute to the development of a sufficient demand response strategy to reduce reliability problems from renewables and make electricity markets work like other markets. Through the Electricity Market Reform, a delivery body will be enabled to contract for capacity through a Capacity Market. This project tests the feasibility of a Capacity Market for a segment of the UK electricity market customers by designing a dynamic model with real data input from existing industrial load shifting practice.

Key Objectives

This project aims to demonstrate how demand side resources can participate in a Capacity Market in the UK. Specifically, we will simulate a Capacity Market mechanism in which demand resources are aggregated and dispatched in response to tightening capacity markets.

The project's main objectives include:

  • Identification of a basic financial size of the UK Capacity Market in terms of MW/h;
  • An empirically-based description of the conditions upon which commercial and industrial customers are willing to join in a Capacity Market.


KiWi Power Ltd, UK

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