Capacity Market: Hydrogen to Power and interconnectors

What this is about

This is a call for evidence, not a consultation on drafted Rules. DESNZ is asking two technically separate questions that share one mechanism: the de-rating factor, the multiplier that converts a plant's nameplate capacity into the capacity it is allowed to sell into the Capacity Market.

The first question is how to slot Hydrogen to Power (H2P) plants into the CM's technology classification. No H2P plant operates in Great Britain. The government is setting the reliability assumptions and de-rating treatment a class of asset will face before any of it exists, on the basis of evidence solicited from the firms that intend to build it. The CM clears on de-rated capacity, so the category H2P lands in determines how much capacity a hydrogen turbine can sell per MW installed, and therefore whether it can win agreements against incumbent CCGTs and batteries.

The second question is narrower and technical: how to update the "technical adjustment" element of the interconnector de-rating methodology, and specifically how to treat high-impact low-probability (HILP) events, the rare scenarios where an interconnector is unavailable precisely when GB needs imports most. This is timed alongside H2P because both are de-rating-factor decisions and DESNZ is batching the evidence-gathering, not because the substance connects. The interconnector question is live now because the GB fleet has grown, the methodology predates much of it, and the treatment of correlated tail risk (a cold, still, low-wind period across north-west Europe when interconnector counterparties are themselves short) materially changes how much firm capacity an interconnector is credited with.

Both questions are revenue questions wearing reliability clothing. A de-rating factor is presented as an engineering estimate of how much a plant can be relied on at the system stress point. It is also the number that sets how many capacity payments the asset earns. Move the methodology and you reprice the asset without anyone voting on a subsidy.

Options on the table

DESNZ has not put drafted options to stakeholders. This is a call for evidence at the pre-policy stage: the document asks how H2P should be categorised and how the interconnector adjustment should be updated, without proposing a preferred answer. The real choices are nonetheless visible in the questions, and they matter more than the absence of formal options suggests.

H2P category placement

The decision that does the work is which existing technology class H2P is mapped to, or whether a bespoke class is created. CCGTs carry high de-rating factors because they are dispatchable and historically reliable. Batteries are de-rated by duration. If H2P is treated as equivalent to a gas turbine on availability, it inherits a high de-rating factor and competes for capacity payments on close to level terms with CCGTs, despite having no operating record in GB and a fuel supply chain (electrolytic or low-carbon hydrogen, storage, delivery) that does not yet exist at scale. If it is treated as a new and unproven class with conservative reliability assumptions, it gets a low de-rating factor, sells less capacity per MW, and needs a higher clearing price or separate support to be bankable.

Who wins from a generous placement: H2P developers and the hydrogen production chain behind them, who receive a capacity revenue stream sized on assumed rather than demonstrated reliability. Who loses: consumers, who fund CM payments through the supplier charge, and incumbent firm capacity (CCGTs, batteries) whose cleared volumes and prices are diluted by additional de-rated capacity that may not perform at the stress event. A favourable category is a subsidy delivered through classification. It does not appear as a strike price or a levy line, but it transfers consumer money to a chosen technology on the same logic, with less scrutiny because it is presented as a de-rating methodology rather than a support decision.

Interconnector technical adjustment and HILP treatment

The choice here is how much weight to give correlated tail risk. The technical adjustment modifies the raw de-rating factor to reflect that an interconnector's usefulness depends on the counterparty system having power to export. A methodology that treats interconnector unavailability during a HILP event as a low-weight tail case keeps interconnector de-rating factors high, so interconnector operators sell more capacity and earn more CM revenue. A methodology that weights HILP events more heavily, recognising that GB scarcity tends to coincide with north-west European scarcity, cuts interconnector de-rating factors, reduces interconnector CM revenue, and shifts cleared volume and potentially clearing price toward domestic firm capacity.

Who wins from a light HILP treatment: interconnector operators. Who wins from a heavy one: domestic dispatchable generators. Consumers sit on both sides: a lighter treatment clears more de-rated interconnector capacity at lower unit cost but credits capacity that may not deliver in the exact conditions the CM exists to insure against; a heavier treatment buys more reliable domestic capacity but may raise the clearing price if firm capacity is scarcer. The honest framing is that this is a transfer between two classes of provider and a security-of-supply judgement about how much to trust imports under stress, not a neutral technical correction.

Questions being asked

Hydrogen to Power categorisation

- How should H2P plants be categorised within the Capacity Market to enable their participation as a new technology? *(This is the load-bearing question. It is asking which de-rating treatment and reliability benchmark H2P inherits, and whether that benchmark is borrowed from an analogous proven technology or set conservatively for an unproven one. The answer sets the capacity revenue per MW before any plant runs.)* - What evidence exists on the operation and reliability of H2P plants relevant to setting de-rating factors? *(In practice this asks developers and the hydrogen chain to supply the evidence base for their own de-rating factor. Watch for reliance on manufacturer availability claims or overseas demonstration data rather than GB operating history, because there is none.)*

Interconnector de-rating methodology

- How should the technical adjustment element of the interconnector de-rating factor methodology be updated? *(Asking whether the adjustment that converts raw availability into a stress-relevant de-rating factor still reflects the current interconnector fleet and the systems on the other end of the cables.)* - How should high-impact low-probability events be treated within the interconnector de-rating methodology? *(The substantive question. It is asking how much to discount interconnector capacity for the correlated scenario where GB and its neighbours are short at the same time. The weighting choice directly reprices interconnector CM revenue against domestic generation.)*

How to respond

The source text provided does not include the closing date, submission email, response form, or named contact. It states only that this is a call for evidence open to anyone, of particular interest to the energy industry, consumer groups, academia, think tanks, and other organisations with an interest in security of supply and decarbonisation, and it points to a consultation privacy notice.

To respond, go to the publication's page on GOV.UK (DESNZ, "Capacity Market: Hydrogen to Power and interconnectors", published 14 May 2026) and use the response method and deadline stated there. Call-for-evidence windows of this type typically run several weeks; confirm the exact closing date and submission channel from the GOV.UK page before relying on either. If you intend to respond, do it through the official channel listed on that page rather than general DESNZ correspondence, so the submission is logged against this call for evidence.

One practical note for responders: this is the stage where the de-rating methodology is decided in substance. Once a category and a HILP treatment are set, subsequent CM Rule changes adjust parameters within them rather than revisiting the classification. Evidence submitted now, particularly on whether H2P reliability should be benchmarked to demonstrated GB performance rather than assumed availability, and on the correlation between GB and continental scarcity, has more leverage than a later objection to the resulting de-rating factors.