EU Commission investigates UK’s Capacity Market scheme

It follows the EU Court’s landmark ruling which led to the suspension of the scheme last November

Festival Net Zero 2021

The European Commission (EC) has opened an in-depth investigation into the UK’s Capacity Market (CM) scheme.

Under the initiative, generators are offered financial incentives for ensuring power plants are kept on standby and are ready to provide back-up electricity when demand is at its peak, especially during the winter months.

The launch of the investigation follows the EU Court’s landmark ruling which led to the suspension of the scheme last November.

It was in response to a legal challenge brought forward by clean technology company Tempus Energy, which argued the CM gives an unfair advantage to fossil fuel power generation plants over demand side response (DSR) technologies that are “cheaper and more reliable”.

The Commission said in a statement: “The UK has expressed to the Commission its intention to maintain the Capacity Market scheme. Therefore, in order to comply with the General Court’s judgement, the Commission has today opened an in-depth investigation under EU state aid rules into the scheme. The Commission’s investigation will focus, in particular, on the participation of energy consumers offering to reduce their electricity consumption in times of supply disequilibrium in the electricity market.

“The opening of the in-depth investigation gives all interested parties the opportunity to submit their comments. It does not prejudge the outcome of the investigation.”

Earlier this month, the Commission appealed against the EU Court ruling.

Energy UK said it is “pleased” with the launch of the investigation.

Chief Executive Lawrence Slade added: “This is an important step towards reinstating it and providing much needed certainty for capacity providers. We firmly believe that the CM remains the best way to ensure security of supply at the lowest cost to customers through providing a level playing field for all technologies. With some £1 billion of payments for existing plants and new developments having been halted by last year’s ruling, it’s vital for capacity providers, suppliers, security of supply and indeed the whole market that the EC resolves the situation as soon as possible.

“We will continue to work with BEIS and the EC to help achieve this on behalf of the energy industry.”

Additional Information

As long as the UK is an EU Member State, it has all the rights and obligations of the membership. In particular, EU competition law, including EU State aid rules, continue to apply in full to the UK until it is no longer a member of the EU.

If the Withdrawal Agreement agreed between the EU and the UK government will enter into force, EU law will continue to apply to and in the UK after 29th March 2019, until the end of the transition period.

Latest Podcast