S.11. State Aid

D.10.2. Competition Law

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EC approves six electricity capacity mechanisms

Wednesday, February 7, 2018

The EC stated that the introduction of capacity mechanisms is in line with EU state aid rules

The EC has approved electricity capacity mechanisms in Belgium, France, Germany, Greece, Italy, and Poland as compatible with EU state aid rules. The EC stated in a press release that it “found that the measures will contribute to ensuring the security of supply whilst preserving competition in the Single Market”.

According to the EC, the advantage of the implementation of such schemes is that “demand response operators may be able to react faster than electricity generators in critical situations, and are generally more environmentally friendly”.

In Italy and Poland, the EC authorised market-wide capacity mechanisms; considering it may be necessary where electricity markets face structural security of supply problems. “Under a market-wide capacity mechanism, capacity providers can obtain a payment for being available to generate electricity or, in the case of demand response operators, for being available to reduce their electricity consumption”.

The EC also authorised capacity mechanisms for France and Greece, specifically promoting demand response. The EC reasoned by saying that “demand response schemes pay customers to reduce their electricity consumption in hours when electricity is scarce”.

For Belgium and Germany, the EC endorsed the creation of strategic reserves, stating that “these reserves keep certain generation capacities outside the electricity market to be used only in emergency situations”.