UK Hopes EU Will Solve Capacity Muddle 'Early 2019'

The UK government said December 6 it is working closely with the European Commission (EC) on necessary steps for the Great Britain capacity market (CM) scheme to be investigated as soon as possible. This follows the mid-November judgment of the General Court of the EU Court of Justice which imposed a standstill period on GB CM.

The UK government Dec.6 stresses that the Court did not find the design of the GB CM to be incompatible with EU state aid guidelines: “As such, we are exploring together with the Commission the most rapid and effective path to conduct the formal investigation into the scheme in a way that meets all process requirements referred to in the judgment. The Commission envisages issuing an Opening Decision to open the formal investigation in early 2019. Subsequently, third parties will be able to submit comments on the decision.”

Ratings agency Moody’s said Nov.20 there was a risk that British generators could lose up to £4.3bn ($5.5bn) if capacity payments were scrapped.

However, in its Dec.6 notice the UK government says that “one possible outcome of the investigation” is that the EC reaches a positive decision after its investigation - which would mean that aid granted under the GB CM before the judgment would be all right, and the results of all auctions to date would stand and further auctions could be held.

At the request of the UK government, National Grid is continuing to operate the Capacity Market scheme in the meantime, short of making payments, to ensure that capacity providers may be eligible for deferred payments after the standstill period (subject to EU state aid clearance).  

The UK government added that it will hold a T-1 top-up auction during summer 2019, for delivery in winter 2019/20, making any agreements conditional on the outcome of the EC’s formal investigation, and would shortly consult on necessary changes to allow for such a T-1 auction – adding that it would be “technology-neutral”. It promised to update stakeholders on progress.

The full Dec.6 UK government notice on the GB CM, and earlier ones, can be read here.