Department for Energy Security and Net Zero, Capacity Market Scheme (as amended in 2025)

This Department for Energy Security and Net Zero, Capacity Market Scheme report relates to proposed modifications to DESNZ’s capacity market scheme, originally introduced in 2014, including removing the original 10-year limit for the scheme. The scheme provides payment to electricity suppliers if they provide electricity capacity at points when demands might exceed the available electricity supply.

Our key takeaways from the Subsidy Advice Unit (SAU) report are:

• Where schemes cover a large period of time, assessments should consider evidence relating to the entire period and should address any previously identified shortcomings of the scheme.
• Alongside considering potential alternatives to a subsidy, assessments should also outline any complementary actions to the subsidy that will be undertaken and how the subsidy will still be required despite these complementary actions.
• Assessments should clearly explain how the removal of an end date from a scheme is proportionate / limited to what is necessary, especially considering paragraph 3.99 of the Statutory Guidance.
• Assessments should detail the continued effects of any scheme on competition and investment, and should take into account any impact to date (including e.g. impacts on the market power of the largest companies in the sector and any barriers to entry).
• When undertaking balancing exercises, assessments should consider whether existing competition shortcoming in markets have an impact when identifying potential negative effects of subsidies

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