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Assured Energy Outlook: Issue 31 – April 2019

European Commission confirms Capacity Market investigation

The European Commission confirmed that it would be undertaking a full investigation of the Capacity Market (CM), the scheme which guarantees the UK’s security of supply.

The CM is a scheme The Department for Business, Energy and Industrial Strategy (BEIS) said in an update on 20 March that European Commissioner for Competition Margrethe Vestager sent a letter to Foreign Secretary Jeremy Hunt announcing the investigation.

Vestager said that the investigation would focus on whether the CM is sufficiently open to all relevant capacity providers, especially those providing demand-side response (DSR). This is a form of flexibility which enables electricity consumers such as businesses to earn extra revenue through selling electricity generated onsite (via rooftop solar or another form of generation) or to take advantage of cheaper electricity through changing their consumption behaviour. This enables the balancing of the electricity grid without significant expansion of infrastructure.

The investigation will focus on whether the CM treats DSR operators and conventional generators unfairly concerning the contract lengths offered, Vestager said. It will also look at whether the CM’s cost recovery method fails to sufficiently incentivise consumers to reduce their consumption during demand peaks.

In the update, BEIS said it welcomed the EC’s opening conclusion that the CM “contributes to an objective of common interest and is necessary”. BEIS added: “We are confident that the CM is the most appropriate way to deliver secure electricity supply at least cost to consumers, and that the investigation will determine that it is fully compliant with State aid rules upon a full review of the evidence.”


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