The European Commission has decided it must carry out an in-depth investigation to determine whether the Capacity Market scheme is in line with EU State Aid rules.
The CM was suspended in November, when the European Court decided that in the original State Aid investigation the Commission should have opened an in-depth investigation to look more closely at demand side responders’ participation in the market.
The Commission has now opened an in-depth investigation under EU State aid rules into the scheme, which could take 18 months. The Commission says its investigation will focus, in particular, on the participation of energy consumers offering demand side response.
Dr Jonathan Marshall, head of analysis at the Energy and Climate Intelligence Unit (ECIU) said, “The UK’s capacity market has been undeniably successful at ensuring that the lights will not go off, and doing so at rock bottom prices. However, to-date it has penalised 21st century technology and market innovations at the expense of that from years gone by. By kicking off its investigation, the European Commission should give investors clarity on whether pre-agreed payments will be made, and how the scheme will look going into the future.
“Allowing demand side response to compete on an equal footing with other technologies is the minimum we can expect from a supposedly technology-neutral system. It will light the fire under a nascent industry, one that will be vital for the new generation of power systems that we will see around the world. As one of the tools for balancing variable power sources, boosting demand side response – alongside new interconnectors and storage – will ensure that we can install more renewable energy sources. This will both reduce household bills and cut carbon emissions, a win-win situation.”
Further reading
Ofgem rejects plan to collect Capacity Market payments during hiatus
BEIS select committee: what is ‘Plan B’ for Capacity Market?