BOOKS: HANCHER Leigh, HAUTECLOCQUE Adrien et SADOWSKA Malgorzta (dir.), Oxford University Press, 2015, 448 p.

Capacity Mechanisms in the EU Energy Market. Law, Policy, and Economics, Leigh HANCHER, Adrien de HAUTECLOCQUE et Malgorzta SADOWSKA (dir.)

Leigh Hancher, Adrien de Hauteclocque, Malgorzata Sadowska

This section selects books on themes related to competition laws and economics. This compilation does not attempt to be exhaustive but rather a survey of themes important in the area. The survey usually covers publication over the last three months after publication of the latest issue of Concurrences. Publishers, authors and editors are welcome to send books to stephane.rodrigues-domingues@univ-paris1.fr for review in this section.

The numerous contributions gathered in this book address the issue of generation capacity levels in liberalised energy markets. Capacity mechanisms are measures taken by Member States to ensure that electricity supply can match demand in the medium and long term. They are aimed at supporting investment and at ensuring security of supply. In practice, they would often involve State aid. The editors’ preface presents capacity mechanisms as “just another form of state-driven support which compensates generators for their capacity, that is, their availability to produce energy at some point in the future.

Such State aid is subject to a set of special rules, embodied in the Guidelines on State aid for environmental protection and energy 2014–2020 (2014/C 200/01). The discussion about capacity mechanisms and security of supply fits into the overall European policy objectives. On 22 January 2014 the European Commission (the “Commission”) proposed the energy and climate objectives to be met by 2030 in a communication entitled: A policy Framework for climate and energy in the period from 2020 to 2030 [COM(2014) 15 final]. On 29 April 2015, the Commission launched a Europe-wide sector inquiry into capacity mechanisms, the first State aid inquiry across an entire industry sector. The purpose of the inquiry is to examine notably whether capacity mechanisms ensure sufficient electricity supply without distorting competition or trade in the EU Single Market. The inquiry complements the Commission’s Energy Union Strategy to create a connected, integrated and secure energy market in Europe.

Some of the contributions included in the book suggest that “reform of the existing market design should be exploited first before embarking on the introduction of more extensive mechanisms in the form of capacity mechanisms.” This is consistent with ongoing reform plans to the current electricity market design, one of the key objectives of the EU’s “Energy Union,” which aim to significantly improve market functioning in the future.

The different contributions made by 34 authors address a variety of issues in three different sections of the book, entitled respectively “Policy,” “Economics” and “Law.” A final section presents different case studies about ten Member States of the EU, as well as about Norway. It is difficult to summarise all the issues discussed in the various sections of this seminal volume. The analysis is on occasion questionable. For instance, Leigh Hancher argues in the legal section that the November 2013 Commission decision entitled Delivering the internal electricity market and making the most of public intervention [C (2013) 7243] announced a change of heart regarding electricity generators, confirmed by the Guidelines on State aid for environmental protection and energy. It is this change of heart that would explain that Member States are now entitled to consider that certain services in the energy sector should be regarded as Services of General Economic Interest (SGEI). The example given to support the analysis is the 20 November 2013 decision in the Lithuania Aid to Klaipedos Nafta – LNG Terminal case (State aid SA.36740 [2013/NN]), to be contrasted with the 18 December 2013 Commission decision to initiate the formal investigation procedure in the United Kingdom Investment Contract (early Contract for Difference) for the Hinkley Point C New Nuclear Power Station case (State aid SA.34947 [2013/C] [ex 2013/N]).

However, the SGEI argument applies only to the first of these cases. In the second one, where the final decision of 8 October 2014 is currently being challenged before the General Court of the EU in cases T-356/15 and T-382/15, the situation is different. The Hinkley Point C case is the first case where an investment project in the nuclear field has been notified as a State aid in addition to being notified under Article 41 of the Euratom Treaty. As such, it will define the relationship between the TFEU and the Euratom Treaty. Indeed, the latter Treaty does not prohibit State aid. However, such investment projects in the nuclear field should no longer be immune to State aid assessments. In the Hinkley Point C decision, the Commission has not taken on board the reasoning based on an obligation of general economic interest. There is an increased State aid scrutiny of all the sectors of the economy, including the nuclear sector. Two recent examples are the decisions in the Waste Contract for New Nuclear Power Stations (State aid SA.34962 [2015/N]), decision not to raise objections of 9 October 2015), as well as the decision to initiate the formal investigation procedure about the restructuring aid to Areva (State aid SA.44727 [2016/C] [ex 2016/N], decision of 19 July 2016).

Overall, the issues of capacity mechanisms, security of supply and decarbonisation of the economy remain hot topics that are far from exhausted by this useful academic contribution to the political, legal and economic debate (which already needs some updating).

[Les opinions exprimées dans cette recension sont personnelles et n’engagent pas l’institution à laquelle appartient son auteur.]

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Author

Quotation

Athanase Popov, Capacity Mechanisms in the EU Energy Market. Law, Policy, and Economics, Leigh HANCHER, Adrien de HAUTECLOCQUE et Malgorzta SADOWSKA (dir.), November 2016, Concurrences Review Nº 4-2016, Art. N° 82030, pp. 254-255

Editor OUP Oxford

Date 24 September 2015

Number of pages 433

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