EU investigates state aid for French gas plant

The European Commission has launched two separate investigations into the French power market. The first will look into the country-wide capacity mechanism – which offers incentives to electricity providers on top of income […]

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The European Commission has launched two separate investigations into the French power market.

The first will look into the country-wide capacity mechanism – which offers incentives to electricity providers on top of income obtained by selling power on the market.

These rewards might have an impact on competition in the internal electricity market and have to be assessed under EU state aid rules, according to the Commission.

It is concerned certain companies could be favoured over their competitors – which could hinder the entry of new players.

It will also assess whether the objectives could not be reached with less costly measures and examine whether it is suitable to encourage investments into new capacity.

The second investigation will look into whether state aid for a new gas-fired power plant in Brittany is in line with EU state aid rules.

The aim is to increase the region’s electricity generation capacity – which is not well connected with the rest of France – but there are concerns it might “only support one type of technology”.

The Commission also thinks it might not be open to other potential solutions such as those also being implemented in Brittany. These include other types of power generation, demand side management, network extensions or storage solutions.

It added there are concerns that it is at risk of creating “a subsidy dependent market”, where investors will develop projects only on the basis of public tenders granting state aid. Therefore, the tender could risk making the problem worse in the long term.

Commissioner Margrethe Vestager, who is in charge of competition policy, said: “France has a legitimate interest to ensure the security of energy supply for its population and protect against the risk of blackouts. It’s our role to ensure that this is done in a cost-effective and competitive way so that electricity prices are kept in check.”