The UK government plans to hold a T-1 ‘top up’ auction next summer, despite the EU Court in November having annulled state aid approval given by the European Commission for the country’s capacity market.
Any agreements in the new auction for delivery in winter 2019-2020 will be conditional on the outcome of a formal investigation by the commission, which the latter envisages opening early next year, the government said.
It added that if the commission reaches a positive decision following an investigation, aid granted under the UK capacity market before the judgment would be considered “compatible with the internal market – such as capacity agreements arising from auctions held to date, and capacity payments in respect of those agreements”.
Therefore, all the “results of auctions to date would stand, and further auctions could be held”.
The UK added that it is working closely with the commission on steps towards an investigation taking place as “quickly as possible”.
In the meantime, National Grid has been instructed by the government to continue to operate the capacity market scheme, short of making payments.
This is to “ensure that capacity providers may be eligible for deferred payments after the standstill period – subject to state aid clearance. Additional actions will be taken to explore continuity in supplier charging arrangements”, the government said.
Renewable Energy Association head of policy Frank Gordon said: “We welcome this clarification from government, in particular National Grid’s commitment to continue to operate the scheme and the plans for a new ‘T-1′ auction in summer 2019 while discussions with the European Commission are on-going.
“We caution, however, that the summer date may be challenging given the processes to meet.”
He added that REA believes the capacity market to be a “fundamentally flawed” scheme, that prejudices dirty diesel generation and fossil fuel plants over modern clean technologies.
“We agree that in principle though that the market should remain in place for existing projects in the immediate term,” Gordon said.
“We are encouraged by the degree of clarity the government has offered here today as the ECJ’s ruling has created significant uncertainty for the impacted developers and wider power system alike.”
In November, the General Court of the EU ruled that the European Commission had failed to assess properly the role of demand-side response within the capacity market when it gave approval in June 2014.
DSR outfit Tempus Energy had brought the legal challenge on the grounds that the mechanism gave unfair advantages to power plants over demand-side response.