Following a legal appeal, by Tempus Energy, and a subsequent ruling by the EU General Court in February 2019, the EU commission has been conducting an in-depth investigation into whether the Capacity Market (CM), in place in GB since 2014, contravened EU state aid regulations.
On the 24thof October of this year, The Commission’s investigation concluded and confirmed that the Capacity Market scheme, covering the period 2014 “ 2024, complies with EU State aid rules, in particular with the 2014 Guidelines on State Aid for Environmental Protection and Energy.
The investigation confirmed that”the scheme is necessary to guarantee security of electricity supply in Great Britain, is in line with EU energy policy objectives, and does not distort competition in the Single Market.“Notably, the Commission did not find any evidence that the scheme would put demand response operators or any other capacity providers at a disadvantage with respect to their participation in the scheme.
Also in October 2019, Ofgem hosted a workshop with stakeholders on the ongoing process to simplify the process of introducing rule changes to the CM, described by Ofgem as “An opportunity to assist in developing the principles and framework behind the revised Capacity Market Rules (“Rules”) change process.”
In the period during which the EU commission was investigating the CM, many participants took the opportunity to review the CM business model amidst record low Clearing Prices. We don’t expect every development that was halted as a result of the CM interruption to be brought forward, however, the initial evidence is that the industry is looking resume participation. The T-3 auction for delivery year 2022/2023 is scheduled for January 2020, the impact of the impending General Election, if any, on the CM as a whole, and this auction in particular, remains to be seen.
