Margrethe Vestager – Photo © European Union 2018
(BRUSSELS) – The European Commission approved Wednesday under EU State aid rules electricity capacity mechanisms in Belgium, France, Germany, Greece, Italy and Poland, to safeguard security of electricity supply.
While capacity mechanisms can help to safeguard security of electricity supply, they must be designed so as to avoid distortions of competition in energy markets, said the EU’s Competition Commissioner Margrethe Vestager: “I am glad that our close cooperation with national authorities has enabled us to today approve well-designed capacity mechanisms in six EU countries. They will foster competition among all potential capacity providers to the benefit of consumers and our European energy market.”
Capacity mechanisms covers arrangements by which EU Member States pay electricity generators extra in order to keep plants open or to build new ones with the goal of ensuring security of electricity supply.
The Commission acknowledges that ensuring security of electricity supply is an important objective. But it says that if they are not well-designed, they can cause higher electricity prices for consumers, give undue advantages to certain energy operators or hinder electricity flows across EU borders.
The Commission has, in close cooperation with the relevant national authorities, assessed six mechanisms in Belgium, France, Germany, Greece, Italy and Poland to ensure they meet strict criteria under EU State aid rules, in particular 2014 Guidelines on State Aid for Environmental Protection and Energy.
In this context, the Commission says it has also taken into account insights from a 2016 State aid sector inquiry on capacity mechanisms.
The six capacity mechanisms approved by the EU executive concern more than half of the EU population. They cover a range of different types of mechanism that address the specific need in each Member State.
In the cases of Belgium and Germany, the Commission has authorised strategic reserves.
Strategic reserves keep certain generation capacities outside the electricity market for operation only in emergencies. In the cases of Italy and Poland, the Commission has authorised market-wide capacity mechanisms. These can be necessary where electricity markets face structural security of supply problems.
In the cases of France and Greece, the Commission has authorised capacity mechanisms specifically promoting demand response.
Demand response schemes pay customers to reduce their electricity consumption in hours when electricity is scarce. The advantage of such schemes is that demand response operators may be able to react more quickly than electricity generators and are generally more environmentally friendly.
EU approval of six electricity capacity mechanisms - background guide
