State Aid case SA.35980 | GB capacity mechanism

Author (Corporate)
Publication Date 2019
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In-Depth investigation conducted by the European Commission on whether the British Capacity Market scheme to safeguard security of electricity supply is in line with EU State aid rules.

Further information:

The Capacity Market scheme aims to ensure security of electricity supplies in view of the projected increases in electricity demand and the upcoming closure of a significant share of generation capacity. In return for a steady payment for the duration of the capacity agreement (ranging between 1 and 15 years), successful bidders in the auctions are required to provide capacity at times of stress events on the electricity system or face financial penalties.

The European Commission found in June 2014 the Capacity Market scheme to be compatible with EU State aid rules. However, the Court of Justice of the European Union annulled the assessment in November 2018 on procedural grounds, following an appeal by a company operating in the market. The Court did not rule on the compatibility of the scheme with State aid rules, but considered the Commission should have opened an in-depth investigation to gather more information before making the decision.

While the Commission appealed the CJEU's judgement, this does not suspend the effects of that judgement, which means the Commission had to reassess the compatibility of the Capacity Market with the internal market. The United Kingdom (UK) expressed to the Commission its intention to maintain the Capacity Market scheme. The in-depth investigation was launched in February 2019 and, on 24 October the European Commission approved this scheme.

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Commentary and Analysis
EurActiv, 23/10/2019: UK capacity market déjà vu: A solution that’s still in search of a problem

Reuters, 07/12/2018: Britain confident of EU decision on power capacity market by October 2019
City AM, 21/02/2019: EU opens investigation into scheme designed to keep British lights on
Reuters, 21/02/2019: EU regulators to probe UK power capacity scheme after court veto
The Guardian, 24/10/2019: Brussels allows UK to subsidise fossil fuel generators
Reuters, 24/10/2019: EU Commission approves UK billion-pound power backup scheme
EurActiv, 25/10/2019: EU regulator clears UK’s billion-pound power back-up scheme

UK Government: Capacity Market
UK OFGEM: Capacity Market (CM) Rules
European Commission: Press Release, 21/02/2019: State aid: Commission opens in-depth investigation into British Capacity Market scheme
European Commission: Press Release, 24/10/2019: State aid: Commission approves the British Capacity Market scheme

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