Capacity withholding can sometimes be qualified as manipulative practice to artificially cause prices to be at a level not justified by market forces of supply and demand (including actual availability of production, storage or transportation capacity).




Irrational bidding behaviour of a market participants artificially inflating (or dampening) prices to uncompetitive high (or low) levels could also be considered predatory pricing under competition law - even if not prohibited under REMIT.


The questions arising in this context belong to the fundamental ones and concern, for example, a delicate and subtle division between an optimising a portfolio of assets across timeframes as a legitimate commercial strategy, on the one hand and a market manipulation on the other hand.


Is a legitimate behaviour to restrain bidding in the forward market or day-ahead market - in expectation of higher returns in the intraday market or balancing market - a manipulative capacity withholding?


Wholesale electricity markets’ specificities play a role in this puzzle, where regulators seem to be aware of extreme complexity of potential factual circumstances.

ACER in its Guidance on the application of REMIT (4th edition, updated on 15 October 2019, pkt 6.4.1 (i), p. 38, 39) underlines the need to reflect “the difference between market outcomes that are the result of true market conditions, such as scarcity and those that are the result of market manipulation through withholding of capacity”.


See also:


Market manipulation prohibition

under REMIT


Wash trades






Marking the close



According to the ACER, manipulative capacity withholding occurs, for example, “when a market participant with the relative ability to influence the price or the interplay of supply and demand of a wholesale energy product, decides, without justification, not to offer or to economically withhold the available production, storage or transportation capacity on the market. This includes the unduly limiting of infrastructure or transmission capacities, resulting in prices that likely do not reflect the fair and competitive interplay of supply and demand.


In particular, electricity generation capacity withholding refers to the practice of keeping available generation capacity from being competitively offered on the wholesale electricity market, even though offering it competitively would lead to profitable transactions at the prevailing market prices”.


Two forms of electricity generation capacity withholding are differentiated by ACER, i.e.:


- physical withholding (not offering the available generation capacity at any price),

- economic withholding (actions undertaken to offer available generation capacity at prices which are above the market price and do not reflect the marginal cost (including opportunity cost) of the market participant’s asset, which results in the related wholesale energy product not being traded or related asset not being dispatched).


Electricity generation capacity withholding may be performed by one or more market participants (for example, producer or storage asset owners) acting independently or in collaboration.


ACER unequivocally underlines that REMIT applies to electricity generation capacity withholding irrespective of whether competition law (also) applies.

In case of intent, any action involving capacity withholding, even beyond the issuing of orders to trade or the entering into transactions, can amount to an attempt to manipulate the market.


However, the ACER acknowledges the fact that electricity generation capacity withholding does not always automatically amount to a breach of Article 5 of REMIT.


As the Agency underlines, “REMIT does not prohibit prices to be high, provided that they reflect a fair and competitive interplay between supply and demand”.


A case-by-case analysis of the circumstances and specificities of the market (like, for example, different timeframes and types of market places) is therefore needed.


The ACER proposes the following methodology, based on two concurrent elements, for assessments whether a behaviour involving electricity generation capacity withholding amounts to a breach of Article 5 of REMIT in view of the market manipulation criteria as defined in Article 2(2) of REMIT (e.g., and not limited to, setting prices at an artificial level).


In the first step it is necessary to assess whether the market participant at issue is able, in the case-specific circumstances, to influence the price or the interplay of supply and demand of a wholesale energy product by engaging in such behaviour (for example, being a ‘pivotal supplier’ i.e., a power supplier whose capacity must be used to meet peak demand and whose capacity exceeds the market’s supply margin).


The second stage, that appears to be more complex, is the assessment of legitimate justification for not offering available generation capacity or offering it above marginal cost.


The category of “legitimate justification” can, in principle, include technical, regulatory and/or economic determinants.


Technical reasons seem to be in this regard the most objective elements.


With respect to regulatory aspect market participant can be, for instance, in situation of force majeure or localised transmission constraints.


The most contestable justifications will most likely be the economic ones.


ACER understands the “economic” justification as the opportunity costs, which represent the expected value of the most valuable choice that was not taken.


In wholesale electricity markets, this can, for example, represent producing at a different point in time for energy-limited generation assets, e.g. reservoir hydropower units, or producing in a different sequential market for capacity-limited generation assets.


ACER declares, finally, that the Agency intends to provide further clarifying guidance with respect to above justifications.


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Also EFET Position paper of 31 January 2020 (Price formation and capacity withholding in light of Regulation (EU) 2019/943 and Regulation (EU) 1227/2011) recommends clarifying further the concept of “economic withholding” and “opportunity costs”.


In the EFET’s opinion the text of the ACER’ guidance “seems to indicate that opportunity costs should be considered alongside short-run marginal costs when assessing an asset owner’s or operator’s marginal costs. This should be stated more explicitly and should not be limited to “energy-limited generation assets” or “capacity-limited generation assets" but should be open to any generation asset.


Moreover, the ACER’s reference to the specificities of different timeframes and types of market places should, according to the EFET, be also expanded to include both an energy-only market and a combination of a capacity and energy market, as the ACER’s guidance should apply consistently to both of these types of market mechanisms.