On 7 February the European Commission approved six new capacity mechanisms in the name of security of supply, insisting that they will not distort the Single Market. Two problems: one, the national decisons come as the EU tries to negotiate Europe-wide power market rules for the next decade. Two, the Commission wants those market rules to exclude coal plants from public support – when it has just authorised Poland to give state aid in the form of capacity payments for the construction of new coal plants. Critics said it was bad news for the Paris Climate Agreement and the internal energy market.
There was no press conference, but the EU’s Commissioner for Competition Margrethe Vestager summed up her latest energy news in a tweet on 7 February: “We don’t want distortion of competition in energy markets, nor black outs if e.g. wind is not blowing. Capacity mechanisms in BE, FR, DE, PL, IT and EL approved today live up to both.”
Climate campaigner Mark Johnston’s response was representative of many: “Blind to climate crisis this is EU justification for 15-yr new-build coal subsidy in Poland. It shows how in wider sense EU’s electricity reforms continue to take us backwards.”
The purpose of capacity mechanisms is to guard against blackouts. They offer capacity providers additional remuneration on top of that from electricity sales, to maintain or invest in new capacity. Since this extra payment could give providers an unfair competitive advantage, it has to be approved under EU state aid rules. In practice, this means Member States’ applications were assessed against the EU’s 2014 energy and environment state aid guidelines, complemented by insights from the Commission’s 2016 state aid sector enquiry into capacity mechanisms.
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