|UK capacity market in the light of EC State aid requirements|
|Sunday, 07 July 2013 14:12|
The intended UK capacity market, the major milestones thereof have been recently revealed, appears to reflect the key points of the European Commission' recent consultation on State aid criteria to be applied to capacity mechanisms.
Among requirements such capacity mechanism must meet in order not to infringe the EU State aid rules, according to the above consultation are:
a. be allocated after an open competitive bidding process,
b. allow demand response and energy efficiency solutions to bid into capacity markets on an equal basis to generation,
c. not be confined to any particular generation technology, i.e. being technologically neutral.
The UK Government has stressed that the future UK capacity market will be technology neutral and all existing and new forms of capacity will be eligible to participate, except, however, for capacity supported by Contracts for Difference, small scale Feed in Tariffs or the Renewables Obligation, and interconnected capacity.
It was also decided that other features of the future UK capacity market will be:
• Demand side response (DSR) capacity will be eligible, and will be supported by transitional arrangements to develop the capability of the sector.
• Government has amended the Energy Bill so that projects that deliver permanent reductions in electricity demand (EDR) could also participate in the capacity market.
• Eligible capacity providers will offer capacity in a pre-qualification process run by the System Operator.
• Pre-qualified capacity will enter competitive central pay as clear auctions also run by the System Operator.
It is clearly visible, British legislators strive on an ongoing basis to minimise the risk of infringing State aid regime by the projected reforms. The above checkpoints for compliance are crucially important, however, not the only ones.