EC Probes UK Capacity Market
The European Commission (EC) has opened an in-depth investigation to determine whether the British capacity market scheme is in line with EU state aid rules, it said February 21. This follows the EU General Court's annulment of a previous EC approval of the scheme that aims to safeguard security of electricity supply, normally by adding generation capacity, with long-term payments to justify major investment in capacity.
The UK government's Department for Business, Energy and Industrial Strategy (Beis) told NGW in January that the capacity market has been at a standstill since the Tempus case in November, and said the EC had confirmed that it will be conducting an investigation into the original state aid notification for the capacity market. The government spokesman said it was "working with the EC to ensure they have everything necessary to re-consider the case for approval of the capacity market scheme as quickly as possible."
Tempus did not want to build a power plant – the customary goal of participants in the capacity market – but to encourage consumers to reduce their electricity demand at peak times, which would have the same effect.
The UK has told the EC that it intends to maintain the capacity market scheme so the EC, in order to comply with the court's judgment, has opened an in-depth investigation which will focus on the participation of energy consumers offering to cut demand.
In July 2014, the EC found the capacity market scheme was compatible with EU state aid rules and did not jeopardise competition in the single market. But in November 2018, following an appeal of the EC's 2014 decision by Tempus, a company operating in the market, the court annulled the decision on procedural grounds (Case T-793/14).
The court did not rule on the compatibility of the capacity market scheme with state aid rules but on whether the EC should have opened an in-depth investigation to gather more information.