Capacity Market cleared by European Union
The UK’s Capacity Market has now been reinstated following approval from the European Commission.
Introduced in 2014, the Capacity Market mechanism ensures Great Britain has enough reserve power to balance and safeguard the security of electricity supply during the winter peak months.
The mechanism was put on hold in November 2018 following an in-depth investigation into the alleged misuse of State aid funding which claimed that the mechanism favoured coal, diesel and gas power generation over other generating technologies.
The European Court of Justice (ECJ) annulled the decision, effectively suspending the Capacity Market and preventing Britain from both running any further auctions and issuing any payments.
The ruling prompted an in-depth investigation from the European Commission to reassess the compatibility of the scheme with EU State aid rules, which today concluded that the scheme was clear to continue.
The European Commission’s investigation
The European Commission said it received and analysed feedback and comments from 35 interested parties across industry including energy producers, interconnector operators, demand response operators, trade associations, non-governmental organisations and network operators.
The European Commission’s investigation confirmed that the British Capacity Market scheme covering the period 2014-2024 complies with EU State aid rules. In particular, the investigation confirmed that the scheme is necessary to guarantee security of electricity supply in Great Britain, is in line with EU energy policy objectives, and does not distort competition in the Single Market.
The Commission said did not find any evidence that the scheme would put demand response operators or any other capacity providers at a disadvantage with respect to their participation in the scheme.
Security of Supply
In a written response to Parliament the Secretary of State for Business, Energy and Industrial Strategy, Andrea Leadsome, said; “I am pleased to announce that today the European Commission has confirmed its original decision in 2014 to grant State aid approval for the Capacity Market, enabling this vital tool for electricity security of supply to be restored and payments that have been suspended since November 2018 to be made.”
Full details of the Commission’s decision have yet to be published, however, it is understood the UK has committed to implementing a number of improvements to the Capacity Market’s design to reflect the recent market and regulatory developments, including those identified through its recent five-year-review of the effectiveness of the Capacity Market.
Edina CEO, Hugh Richmond, comments; “This can only be good news, not only for the security of electricity supply for the UK but for the industries, like Edina, who supply both power generation equipment and maintenance services into this industry. Edina has installed in excess of 300MW of power into this market over the last 5 years and we look forward to continuing to support the developers and investors in this sector.”
Edina is the official UK and Ireland distributor for MWM manufactured gas engines with outputs rated from 400kWe to 10,300kWe and is a leading supplier, installer and maintenance provider for decentralised gas-fueled power plants for Combined Heat and Power (CHP), Trigeneration and standby power application.