EU Commission advocates relaunch of UK capacity market

Launching an appeal on 25 January, the European Commission aims to overturn the decision by the General Court of Justice which recently annulled the EC’s state aid approval of the UK Capacity Market (CM).

The November ruling, which took both the UK Government and industry by surprise, imposes a “standstill period” on the UK Capacity Market. It prevents the UK Government from holding any capacity auctions, making any capacity payments under existing agreements, or undertaking any other action which could be seen as granting state aid through this mechanism.

Appeal does not affect work on reinstatement

On 15 November the ECJ ruled that the EC had not examined the CM sufficiently before giving approval. The mechanism introduced in the UK in 2014 is meant to guarantee electricity supply in any given circumstance from 2017/18 onwards. While fluctuating renewables provide an increasing share of Britain’s energy supply, the CM remunerates energy companies for providing generating capacity, keeping power plants on stand-by and effectively ready to produce electricity in case of a supply shortage within as few as four hours.

According to the UK Department for Business, Energy & Industrial Strategy (BEIS), the decision to appeal will not affect the work they are doing with the EC to reinstate the CM; moreover BEIS sees the news as positive as it could prevent further similar cases being brought. It follows an announcement from BEIS on 6 December that the government is working closely with the EC to reinstate the CM “as quickly as possible” and that it expects the EC to issue an “Opening Decision” on the formal investigation in early 2019.

Although no further details on the grounds for the appeal are available, this information is expected to emerge within weeks.

Find more information on the EC’s appeal and the initial ECJ ruling on S&P Global, The Energyst and The Guardian.