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State aid to secure electricity supplies

An increasing number of Member States are taking action to secure their electricity supplies and prevent potential black-outs by introducing capacity mechanisms.

Capacity mechanisms are measures taken by Member States to ensure that electricity supply can match demand in the medium and long term.

Capacity mechanisms are designed to support investment to fill the expected capacity gap and ensure security of supply. Typically, capacity mechanisms offer additional rewards to capacity providers, on top of income obtained by selling electricity on the market, in return for maintaining existing capacity or investing in new capacity needed to guarantee security of electricity supplies.

Capacity mechanisms have an impact on competition in the internal electricity market. Many of these mechanisms involve State aid, so they are subject to EU State aid rules. The European Commission has launched a sector inquiry, established a Working Group with Member States and started individual assessments of Member States' capacity mechanisms on the basis of the Guidelines on State aid for environmental protection and energy 2014-2020 ("EEAG").

European Commission adopts interim report of the sector inquiry into capacity mechanisms

The European Commission on 13 April 2016 adopted its interim report consolidating the findings and tentative conclusions of the sector inquiry into capacity mechanisms.

The interim report can be consulted here in all languages:
bg cs da de el en es et fi fr hr hu it lt lv mt nl pl pt ro sk sl sv

The Staff Working Document accompanying the interim report can be consulted here (en only)

Commissioner Margrethe Vestager, in charge of competition policy, said: "European consumers and companies should not have to face black-outs, and capacity mechanisms can help to reduce this risk. At the same time, consumers should not overpay for electricity and competition should not be undermined. The report published today shows that there is a lot of room for Member States to improve how they assess whether capacity mechanisms are needed, and how they design them. Mechanisms that are open to electricity providers across EU borders are key to building a true Energy Union in Europe."

The Commission inquiry on capacity mechanisms shows capacity mechanisms can increase security of electricity supply but also points to a lack of proper and consistent analysis by many Member States of the actual need for capacity mechanisms. It also appears that most capacity mechanisms could be better designed in order to be more market-based and more cost effective. These findings do not prejudge the Commission's assessment of the compatibility with EU state aid rules of any individual capacity mechanism, which requires a case-by-case analysis.

Read the full press release here.

The interim report is now open for public consultation and the Commission invites Member States, stakeholders in the electricity sector and others to submit comments on the interim report and the annexed staff working document by 6 July 2016 to the following email address:

Any questions regarding the interim report or the public consultation procedure should equally be addressed to the above email address.

In the light of comments received, the Commission will publish a final report on the results of the sector inquiry later this year. In the meantime, the Commission continues to assess capacity mechanisms under EU State aid rules, and in particular the 2014 Guidelines on State aid for environmental protection and energy.

Sector inquiry

On 29 April 2015, the European Commission launched a State aid sector inquiry into national capacity mechanisms. The decision initiating the sector inquiry is available in three languages: en fr de

The inquiry aims at gathering information on capacity mechanisms to examine, in particular, whether they ensure sufficient electricity supply without distorting competition or trade in the EU Single Market. It complements the Commission's Energy Union Strategy to create a connected, integrated and secure energy market in Europe.

The Commission sent out questionnaires to selected stakeholders and received 124 replies. The interim report based on these replies is now open for public consultation. On the basis of the feedback it receives, the Commission aims to publish a final report in Q4 of 2016.

More detailed information on the sector inquiry >

Working Groups with Member States

The Guidelines on State aid for environmental protection and energy 2014-2020 (EEAG) contain for the first time rules to assess capacity mechanisms (Section 3.9 of the EEAG). As this is a relatively new field in State aid policy, the Commission has established a Working Group with Member States to help them implement the relevant provisions in the Guidelines and to share experience in the design of capacity mechanisms. The context of the discussions is reflected in thematic papers developed by the Commission (DG Competition). An overview of the different workshops can be found below, along with the papers and slides presented in each meeting.

First Working Group – 22 January 2015 Second Working Group – 14 April 2015 Third working Group - 30 June 2015

Individual State aid cases

The Guidelines on State aid for environmental protection and energy (EEAG) 2014-2020 adopted in July 2014 for the first time contain criteria for the Commission to apply when assessing capacity mechanisms. The first decision on a national capacity mechanism under these Guidelines was adopted on 23 July 2014 and concerned the United Kingdom's capacity mechanism for Great Britain. A list of all cases adopted under the EEAG is given below:


28-09-2015: capacity mechanisms in Europe

With the support of DG Competition, King's College London and the College of Europe at Bruges organised on 29 September 2015 in Brussels the conference "Capacity mechanisms in Europe: The fundamental issues behind the ongoing sector inquiry". The conference provided a valuable input to the ongoing sector inquiry. For more details and the full programme click here .

The presentations are now available:

Keynote speech by Margrethe Vestager, European Commissioner for Competition: "Securing electricity supply in the EU: How to optimise public support"

Session 1 - Which market design is more appropriate for Europe: energy only market or a given form of capacity mechanism?

Chairman: Klaus-Dieter Borchardt, Director DG Energy, European Commission

Jamie Carstairs, Linnfall Consulting, Edinburgh
Carlos Batlle, Comillas Pontifical University IIT, Madrid
Mike Hogan, Senior Adviser, The Regulatory Assistance Project, London
Fabien Roques, Partner CompassLexecon, Paris

Session 2: If a capacity mechanism, which design is most appropriate?

Chairman: Massimo Merola, President GCLC

Rickard Nilsson, Project manager, Nord Pool Spot
Robin Cohen, CRA Vice-President, London
Thomas Veyrenc, RTE Director, Markets department, Paris
Dan Monzani, Head of Security of electricity supply team, DECC, London
Andrea Villa, Senior Analyst in Energy & Regulatory Affairs, Enel S.p.A, Rome

Related policy documents and initiatives

Related links
Speeches and articles - Energy - Electricity - Environment