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EU Approves Mechanisms for Electricity Supply in Belgium, France, Germany, Greece, Italy, Poland

The European Commission said on Wednesday that the EC has approved under EU State aid rules electricity capacity mechanisms in Belgium, France, Germany, Greece, Italy, and Poland.

The Commission said in a press release that the EC found that the measures will contribute to ensuring the security of supply whilst preserving competition in the Single Market.

"Capacity mechanisms can help to safeguard the security of electricity supply, but they must be designed to avoid distortions of competition in energy markets,” Competition Policy Commissioner Margrethe Vestager said.

"I am glad that our close cooperation with national authorities has enabled us to approve well-designed capacity mechanisms in six EU countries. They will foster competition among all potential capacity providers to the benefit of consumers and our European energy market,” he added.

Capacity mechanisms have the important objective of ensuring the security of electricity supply. But if they are not well designed they may cause higher electricity prices for consumers, give undue advantages to certain energy operators or hinder electricity flows across EU borders, the Commission said, explaining this is why the EC has, in close cooperation with the relevant national authorities, assessed six mechanisms in Belgium, France, Germany, Greece, Italy, and Poland to ensure that they meet strict criteria under EU state aid rules, particularly pertaining to the Commission’s 2014 Guidelines on State Aid for Environmental Protection and Energy.

In this context, the Commission said the EC has also taken into account insights from its 2016 State aid sector inquiry on capacity mechanisms. The six capacity mechanisms approved today concern more than half of the EU population. They cover a range of different types of mechanism that address the specific need in each Member State.

In the cases of Belgium and Germany, the Commission has authorised the creation of strategic reserves. These reserves keep certain generation capacities outside the electricity market for only in emergency situations. In Italy and Poland, the Commission has authorised market-wide capacity mechanisms, according to the Commission. These can be necessary where electricity markets face structural security of supply problems.

The Commission has authorised capacity mechanisms for France and Germany, specifically promoting demand response. Demand response schemes pay customers to reduce their electricity consumption in hours when electricity is scarce.

The advantage of such schemes is that demand response operators may be able to react more quickly than electricity generators and are generally more environmentally friendly, the Commission said, adding that Wednesday’s decisions complement the Commission’s Energy Union Strategy to deliver secure, sustainable and competitive energy in Europe.