Capacity Market suspended after ECJ Ruling
The UK Capacity Market has been suspended in what BEIS is referring to as a 'standstill period' after the European Court of Justice overturned a previous decision of the European Commission not to oppose the scheme on state-aid grounds.
The ruling comes from an action brought by Tempus Energy on the scheme, which it says unfairly discriminates against clean energy products in its design. Tempus claims the scheme benefits generation technologies and fossil fuels over clean energy and demand-side response. The ruling can be appealed by the UK in the next two months, but it is not clear at present whether an appeal will be pursued.
BEIS has reported it is working with the European Commission to aid an investigation into the Capacity Market, and is reported to be seeking state-aid approval. In the meantime, no further Capacity Market contracts can be granted, and payments to participants with existing agreements cannot be made. BEIS is said to be working with National Grid to inform those affected.
This is likely to have a significant impact on investor confidence and may stall projects relying on the Capacity Market as a primary or key revenue stream. Following from the evaporation of the subsidy regimes, both developers and investors will no doubt have their confidence further rocked by the recent instability of the UK energy market, in particular those working on renewable energy projects or demand response.