State aid: Sector Inquiry report gives guidance on capacity mechanisms

The European Commission has published the final report of its capacity mechanism sector inquiry. The report concludes that Member States have often failed to adequately assess the need for a capacity mechanism before introducing one. Furthermore, many Member States have yet to implement market reforms that are indispensable to deliver on security of supply issues. Where a capacity mechanism is necessary the report gives practical guidance to Member States on which types of capacity mechanisms may be most suitable to solve the problem identified. Commissioner Margrethe Vestager, in charge of competition policy, said: “Capacity mechanisms need to match a problem in the market and be open to all technologies and to operators from other EU countries. They must not be backdoor subsidies for a specific technology, such as fossil fuels, or come at too high a price for electricity consumers. The sector inquiry report will help the Commission and Member States introduce better targeted capacity mechanisms, and only if there is a genuine need for them. But even if capacity mechanisms are well designed, they can’t replace essential electricity market reforms. That’s why the sector inquiry complements the Commission’s important Clean Energy for All Europeans Package of proposals to make European electricity markets more integrated and work better.”