Capacity Market Charges Explained: The Winter Peak Levy

How the Capacity Market levy works, why it roughly doubled in 2026, and how your business can cut its exposure in the weekday winter peak window.

Capacity Market Charges Explained – The Capacity Market is the insurance policy on the electricity system. It pays power stations, batteries and other providers to be there and ready when demand peaks, so the lights stay on during a cold, still January evening. Every business electricity bill helps fund it.

Most buyers never notice the charge until it moves. In 2026 it moved a lot. The Capacity Market levy roughly doubled on the previous year, which makes it one of the larger single increases on this year’s bill and a cost worth getting to grips with.

What the Capacity Market Is For

The Capacity Market exists to guarantee security of supply. As coal closed and more weather-dependent wind and solar came onto the system, the worry was whether enough firm, controllable capacity would be there on the worst days of the year.

The answer was to pay for it directly. Through auctions held four years ahead and one year ahead, the government buys promises of capacity from generators, storage operators, interconnectors and demand side response providers. Win an agreement and you receive a steady payment for staying available. Fail to deliver when called on, and you pay a penalty. The full set of rules sits under the government’s Electricity Market Reform programme.

The scheme is technology-neutral, so a gas peaker, a battery and a factory willing to switch off all compete on the same terms.

Capacity Market Charges Explained – How the Cost Reaches Your Bill

The payments to capacity providers are recovered from electricity suppliers, who pass the cost through to business and domestic customers. So far, so familiar. The twist is in how the charge is allocated.

Rather than spreading the cost evenly across every unit you use, the Capacity Market levy is collected based on your demand during one specific window: 4pm to 7pm, Monday to Friday, from November to February. These are the Settlement Periods of Interest.

Put simply, what you consume on a weekday winter evening sets your share of the bill. Use less in that window and your Capacity Market cost falls. Use a lot and you pay more than your fair share.

Capacity Market Charges Explained – Why It Doubled in 2026

The Capacity Market charge stepped up sharply for the 2026-27 period. In round terms the all-in figure roughly doubled, from about 7.45 pounds per MWh to around 14.25 pounds.

Measured against the peak window where the cost is actually recovered, the jump looks even bigger. The effective rate across those weekday winter evenings rose from roughly 186 pounds per MWh to about 356 pounds.

Two things drove it: higher auction clearing prices, and a larger volume of capacity being bought to keep supply margins comfortable as older plant retires. The 2026 four-year-ahead auction targeted just under 40GW. As with most of these charges, the direction of travel is up.

The Link to the Winter Peak

The design of the charge is also the opportunity. Because the levy is collected only across that evening window, the Capacity Market rewards the same behaviour that triad avoidance does for transmission charges. Pull your demand down on weekday winter evenings and you pay less.

For a business with any flexibility, that is a real and repeatable saving. A site that can shift production away from the early evening, run a battery or generator through the peak, or simply tighten its operating pattern between November and February can cut its Capacity Market exposure season after season.

This overlaps so neatly with demand side response that a single change to your evening routine can lower your Capacity Market, DUoS and TNUoS costs all at once.

Batteries and Flexibility

The cleanest way to step out of the peak window without disrupting the business is to move the energy rather than the work. A battery charged during the cheap overnight hours and discharged across the 4pm to 7pm peak keeps the site running normally while cutting the demand that counts toward the levy.

Better still, that same battery can earn Capacity Market payments by holding an agreement of its own. So it can sit on both sides of the scheme, lowering your charge and earning revenue. Stack that with the DUoS red-band and TNUoS triad savings, and the case for on-site storage on a large half-hourly site gets stronger.

Even with no capital outlay at all, knowing exactly when the peak window falls and managing demand through it is close to free money for sites that can flex.

Managing a Charge That Keeps Climbing

Like the rest of the non-commodity stack, the Capacity Market is far easier to handle once you can see it clearly. On most bills it is buried among the other pass-through charges and rarely broken out, so the first job is simply to measure what it is costing you. That clarity is the whole point of proper non-commodity cost reporting.

From there it comes down to how much of your demand sits in the peak window and how much of that you can realistically shift. For some sites the answer is very little, and the charge is just a cost of doing business. For others, particularly energy-intensive operations running through the early evening, the winter peak is a standing cost they could cut every year.

The Capacity Market is best looked at alongside the rest of your network and policy charges and your wider energy procurement, because the levers overlap. Catalyst shows you what each charge is doing, models what shifting load would save, and helps you act on it. If your Capacity Market cost has jumped this year, ask our team for a review.

Related service: Non-Commodity Costs, how Catalyst helps businesses understand and reduce the network and policy charges hidden in their energy bills.