LONDON, 6 March 2023 - Piclo Exchange, Piclo’s secondary trading marketplace for Capacity Market (CM) contracts, has completed its first trade for 2.847MW worth £185,000 between Vattenfall and Enel X.
The UK Government is currently reviewing the Capacity Market in its 2023 consultation focusing on strengthening security of supply and alignment with net zero. The proposals, including the strengthening of the Capacity Market penalty regime and the focus on decarbonising existing assets, make competitive, transparent secondary markets all the more important. It is critical that steps are taken to improve secondary trading, including through the role of marketplaces, that make these markets fit for purpose in a net zero energy system.
In 2020, Piclo secured funding from BEIS to work on the FleX Exchange project, an ambitious energy flexibility market trial. In close collaboration with National Grid’s EMR team, Piclo collaborated with the market to understand barriers and help shape improvements to secondary trading in the Capacity Market. In 2021, Piclo Exchange was launched which meant for the first time Capacity Market Providers could register to find, bid to buy and sell existing contracts with other qualified providers in a single marketplace.
James Johnston, CEO Piclo says:
“We’re very pleased to have delivered our first secondary Capacity Market trade between two of the energy market’s most respected companies. Our suite of services facilitating flex markets in the UK and internationally are already helping to make Capacity Markets fit for net zero and accelerate grid decarbonisation. While we see huge potential for secondary markets in the efficient decarbonisation of existing CMUs, further reforms to secondary trading mechanisms are needed to better support this crucial sector.”
Tony Whittle, Head of Enel X UK & Ireland says:
“Digital tools are a critical part of enabling the energy transformation and Piclo Exchange is an example of this in action. Thanks to Piclo, we were able to identify this secondary trade opportunity and efficiently complete the transaction, ultimately allowing us to deliver more value to our I&C customers whose operational flexibility supports the security of electricity supply for all.”
Since launching in 2021, 33 Capacity Market providers have registered on Piclo Exchange, which has raised the visibility of those seeking to trade the 35 contracts that have been advertised. The platform has facilitated the first-ever competitive bidding for contracts on the secondary market with 3 contracts receiving a total of 5 bids and finally, the marketplace has successfully facilitated a secondary trade of 2.847MW between Vattenfall and Enel X.
Optimised markets rely on coordination and stacking across long and short-term markets. Consequently, the ability of participants to trade their contracts to other qualified providers (secondary trade) is an important element of this vision, particularly for those who secure contractual obligations months and years in advance but also intend to participate in closer to real-time opportunities.
Within capacity mechanisms, secondary trading happens when the holders of contracts are unable to deliver their obligation. This can happen if a unit is down for maintenance, the asset goes offline due to the owner decarbonising its units or, in the case of a new build asset, there are construction delays which means it will not be operational when required. In some capacity mechanisms, secondary market trades can help providers avoid financial penalties for unfulfilled delivery.
Competitive secondary markets build confidence as participants know they will be able to trade these contractual obligations if needed or if they want to participate in shorter-term opportunities. In doing so, secondary trading can encourage smaller, decentralised assets to participate, accelerating the decarbonisation of traditionally carbon-intensive markets.
Marketplaces can help streamline FSPs' management of contractual obligations across multiple long and short-term markets, including the ability to secondary trade their obligations. Those interested in helping this market grow are encouraged to contact support@picloflex.com.
Piclo Exchange, our secondary trading platform, enables the trading of existing Capacity Market contracts, further amplifying the benefits of CM auctions to both system operators and flexibility service providers. System operators are able to ensure security of supply as in cases when a Flexibility Service Provider is unable to deliver on a contract, they can transfer it to another provider. FSPs benefit as they’re able to unlock revenue sources that would otherwise have to have been written off.
[This notice was update on 26th March, 2024]
Piclo’s mission is to decarbonise the grid. We develop software solutions that make our energy networks smarter, flexible and more sustainable. Piclo Max, our market access platform, enables flex sellers (such as EV and battery owners) to access all electricity markets from one place. Piclo Flex, our flexibility services marketplace, enables flex buyers (system operators) to source flexible electricity from flex sellers during times of high demand or low supply.
To date, Piclo has over 300,000 registered flexible assets representing 22 GW of registered flex capacity, with flexibility contracts awarded totalling £74m and 2.6 GW+ of flexible capacity procured.
Piclo currently operates in six global markets: in the UK, supporting all six Distribution System Operators (UK Power Networks, SP Energy Networks, Electricity North West, Northern Powergrid, Scottish and Southern Electricity Networks and National Grid Electricity Distribution); and the Transmission System Operator (TSO) (the ESO); in Ireland (ESB Networks), Italy (E-Distribuzione), Portugal (E-REDES)); in Australia (CitiPower, Powercor); and in the United States in New York State (National Grid) and Connecticut (United Illuminating). Aside from its leading position in the UK, Piclo has a growing presence in Europe, USA and the Asia-Pacific.
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