The Capacity Market will soon be back in play after the European Commission approved it. Energy companies with agreements are looking forward to getting paid.
The market was suspended last year following a legal ruling by the European Court of Justice that the Commission did not conduct an in-depth investigation into aspects of compliance with State Aid rules.
The case was bought by Tempus Energy, which argued demand-side response was treated unfairly because it cannot currently bid for agreements longer than a year. New build generation can bid for 15-year agreements.
Announcing its decision, the Commission said it “did not find any evidence that the scheme would put demand response operators or any other capacity providers at a disadvantage with respect to their participation in the scheme”.
It also noted that the UK government has “committed to implementing certain improvements to the scheme for the future” with regards to minimum capacity entry thresholds, rules for new types of capacity and access to long-term contracts.
Beis agreed to look into the case for longer term contracts for DSR within the five-year review, but has yet to announce any changes.
Energy secretary Andrea Leadsom said the department “will shortly consult on arrangements for implementing these commitments”.
The reinstatement means energy companies will get the money withheld during the market’s suspension. That represents around a £1bn for last winter.
Meanwhile the provisional agreements awarded in July are now rubber stamped, and the three auctions scheduled for early next year are set to proceed.
It also means Tempus Energy’s bid to enforce the November judgement via a Judicial Review set to commence next month is now dead.
Meanwhile energy suppliers that have not paid the Capacity Market charge while it was suspended will have to pay up, which may prove a challenge for those already to struggling to pay levies.