LEGAL PRACTICES: STATE AIDS – ELECTRICITY – CAPACITY MECHANISMS

State aid to electricity capacity mechanisms: From an uncoordinated patchwork to a harmonised approach?

Against the background of a changing landscape of electricity markets, a number of EU Member States have devised capacity mechanisms in order to address perceived threats to their national security of supply. However, such mechanisms may raise competition concerns, which the European Commission intends to tackle from the angle of State aid law. In that regard, it stems from the ongoing State aid sector inquiry that while certain capacity mechanisms may be necessary, Member States should improve specific design features and facilitate coordination among their respective national mechanisms. The Commission is now expected to intensify its State aid enforcement action in future years, based on the stringent criteria laid down in the Energy and Environmental Aid Guidelines. The Commission should also to push for further harmonisation of capacity mechanisms in the EU through legislative proposals by the end of 2016.

1. The evening of 4 November 2006, a power shortage affected more than 15 million customers throughout Europe. The disturbance had its starting point in Germany but subsequently large parts of the interconnected European power system suffered from it, i.e. some customers did not have access to electricity for up to approximately 1.5 hours. [1] That kind of incident—extremely rare in Europe—illustrates the importance of maintaining a constant balance between supply and demand on the electrical system. 2. In certain periods of high consumption, i.e. “peak periods,” such balance may be hard to secure. A number of Member States have therefore devised electricity “capacity mechanisms,” which aim at ensuring the adequacy between generation capacity and consumption at all times and remunerating

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Etienne Chassaing, Charlotte Breuvart, State aid to electricity capacity mechanisms: From an uncoordinated patchwork to a harmonised approach?, September 2016, Concurrences Review Nº 3-2016, Art. N° 80084, www.concurrences.com

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