The European Commission has started an in-depth investigation procedure to determine whether the support scheme establishing a capacity market in the United Kingdom (UK) is in line with the European Union (EU) State aid rules. This move comes in the wake of the EU General Court's cancellation of a previous Commission decision approving the scheme.
The capacity scheme was established by the UK government in order to guarantee security of supply and to make sure the available power capacity would meet peak-demand. Under the capacity market, successful bidders in the auctions that commit to provide power, reduce or delay their electricity consumption during times of system stress are remunerated through a 1 to 15-year steady payment.
The European Commission approved it in 2014 but the EU General Court annulled this decision in November 2018, considering that the Commission should have investigated further on some elements of the scheme, such as the participation of energy consumers offering to cut their electricity consumption during peak hours. For the time being, the British government is not able to issue capacity market payments to energy companies or hold auctions, which includes the upcoming bidding rounds aimed to secure additional power capacity for the winter of 2019-2020 and 2022-2023.
Even though the European Commission has appealed the EU General Court decision, this will not suspend the effects of the November 2018 judgment and means that the case has to be re-opened in order to reassess the compatibility of the UK capacity market scheme with the EU internal market.