Electricity capacity mechanisms agreed by EU

Commissioner Margrethe Vestager welcomed new electricity capacity mechanisms © Friends of Europe
Commissioner Margrethe Vestager © Friends of Europe

The European Commission has approved new electricity capacity mechanisms in six member states, to ensure the security of supply.

The new measures were approved under EU state aid rules, in co-operation with national authorities in Belgium, France, Germany, Greece, Italy and Poland, where a number of different electricity capacity mechanisms will be installed, depending on individual needs.

The commission welcomed the announcement, saying that the capacity mechanisms were necessary to ensuring the security of energy supply, and complimented their design, arguing that it would preserve competition in the single market.

Commissioner Margrethe Vestager commented: “Capacity mechanisms can help to safeguard security of electricity supply, but they must be designed so as to avoid distortions of competition in energy markets. 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.”

What are the new electricity capacity mechanisms?

The new mechanisms that have been approved by the commission will impact more than half of Europe’s population, and address the specific needs of each member state. They include:

  • Two strategic reserves, in Belgium and Germany;
  • Two market-wide capacity mechanisms, in Italy and Poland;
  • A demand response tender in France; and
  • An interruptibility scheme in Greece.

The measures will address strategic energy reserves – which keep certain generation capacities outside the electricity market for operation only in emergencies – market-wide mechanisms and promoting demand response.

The possibility of additional remuneration to these countries for operating the capacity mechanisms will need to be assessed under the EU state aid rules because this could potentially have an impact on competition in the internal electricity market.

The commission added that the new systems were proposed to respond to a clearly identified and quantified risk to security of supply. For example, the Belgian electricity market has demonstrated that, during an expected outage of a nuclear power plant in winter 2016/2017, it was unable to meet demand.

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