The European Commission has opened two separate
in-depth investigations to assess whether French plans for a
country-wide capacity mechanism and a tender for a new gas-fired power
plant in Brittany are in line with EU State aid rules.
The Commission has concerns that these plans to remunerate
electricity capacity could, in the case of the country-wide capacity
mechanism, favour certain companies over their competitors and hinder
the entry of new players, and in the case of the gas-fired power plant
in Brittany, support only one type of technology or solution.
Commissioner Margrethe Vestager, in charge of competition policy, said: "France
has a legitimate interest to ensure the security of energy supply for
its population and protect against the risk of black-outs. It's our role
to ensure that this is done in a cost-effective and competitive way, so
that electricity prices are kept in check."
Country-wide capacity mechanism...
Capacity
mechanisms are measures designed to ensure electricity security of
supply. Typically, capacity mechanisms offer additional rewards to
electricity capacity providers, on top of income obtained by selling
electricity on the market. This is in return for maintaining existing
capacity or investing in new capacity needed to guarantee the security
of electricity supplies. These additional rewards may have an impact on
competition in the internal electricity market and have to be assessed
under EU State aid rules.
France plans to implement a national
market-wide capacity mechanism where capacity obligations are traded
between electricity capacity providers (e.g. power plants or demand side
operators) and electricity suppliers. The aim is to ensure that there
is sufficient capacity for the production of electricity and that such
production meets the demand, in particular during extreme winter demand
peaks.
The Commission has concerns that the capacity mechanism
planned by France in its current form favours certain companies over
their competitors and hinders the entry of new players. Moreover, the
Commission will assess whether the objectives of the mechanism could not
be reached with less costly and less distortive measures. The
Commission will also examine whether the planned mechanism is indeed
suitable to encourage investments into new capacity.
Tender for a gas-fired power plant in Brittany
In
parallel to the development of a country-wide capacity mechanism,
France has launched a tender to support the construction of a new
gas-fired power plant (Combined Cycle Gas Turbine -CCGT) in Brittany.
The aim is to increase electricity generation capacity in this region,
which is not well connected with the rest of France.
The
Commission in particular has concerns that support is granted to only
one type of technology and is not open to other potential solutions, for
example those also being implemented in Brittany (as planned in the
"pacte électrique Breton"), namely other types of power generation,
demand side management, network extensions or storage solutions.
Moreover, at this stage, the Commission considers that there is a risk
of creating a subsidy dependent market, where investors will develop
projects only on the basis of public tenders granting State aid.
Therefore, the tender could risk exacerbating the adequacy problem in
the long term.
The Commission will now investigate whether these
initial concerns are justified. The opening of an in-depth investigation
gives France and interested third parties an opportunity to submit
comments. It does not prejudge the outcome of the investigation.
Background
Earlier this year, the Commission launched a state aid sector inquiry into capacity mechanisms.
With
the sector inquiry, the first under EU state aid rules, the Commission
aims to learn more from market participants about the impact on
competition of the various mechanisms introduced and planned. Requests
for information were sent to public authorities and stakeholders in the
sector in May and meetings took place with stakeholders over the summer.
The
sector inquiry encompasses a representative sample of 11 Member States
that have capacity mechanisms in place or are considering them, namely:
Belgium, Croatia, Denmark, France, Germany, Ireland, Italy, Poland,
Portugal, Spain, and Sweden.
The inquiry will allow the Commission
to assess in particular how Member States are applying the 2014 Energy
and Environmental Aid Guidelines (EEAG) in this area, to identify best
practices and to advise Member States in designing capacity mechanisms.
The non-confidential version of the decisions will be published in the State aid register on the competition
website under the case numbers SA.39621 (country-wide capacity
mechanism) and SA.40454 (tender) respectively once eventual
confidentiality issues have been resolved. The State Aid Weekly e-News lists new publications of state aid decisions on the internet and in the EU Official Journal.
