OCCTO Proposes New Supplementary Auction to Retain Aging Thermal Power Plants

At an expert meeting, the Organization for Cross-regional Coordination of Transmission Operators (OCCTO) proposed introducing a new ‘supplementary auction’ in the capacity market to procure additional capacity one to three years before delivery, alongside the existing main auction (T-4) and incremental auction (T-1).

Through FY2030, thermal power plant suspensions and retirements are expected to exceed new capacity additions, while rising demand is expected to tighten supply-demand conditions. In response, the supplementary auction would procure aging power plants scheduled for suspension or retirement that existing measures have failed to secure, potentially through multiyear contracts, to keep them available and operational.

Existing reserve power resources are classified as ‘quasi-supply capacity,’ but they have much in common with the 1–3-year supplementary auction, including their focus on aging power plants and procurement two to three years before delivery. OCCTO noted that, instead of separately soliciting and contracting resources under the two mechanisms, they could be procured together as resources to be brought online when needed.

OCCTO will work with the government on the detailed design, including procurement criteria for the supplementary auction based on the medium- to long-term supply-demand outlook, its interaction with the incremental auction held in the year before the delivery year, and applicable requirements.

🔍 Shulman Commentary:

The proposed supplementary auction would provide a further opportunity to retain existing generation capacity that was not secured through the main auction, particularly aging thermal plants considering retirement. The interaction between the auctions will be an important design points to watch, particularly in determining which resources participate and how much additional capacity the mechanism can secure.

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