EU regulators have sent out more than 200 questionnaires to companies and government agencies as part of an investigation into state subsidies offered to avoid power blackouts, the bloc’s competition chief said on Monday (28 September).
The move follows the launch of a probe in April, with the European Commission targeting Belgium, Croatia, Denmark, France, Germany, Ireland, Italy, Poland, Portugal, Spain and Sweden on their schemes to guarantee supply during peak periods.
“By now, we have sent over 200 questionnaires to public authorities and market participants, in the 11 countries,” European Competition Commissioner Margrethe Vestager said at a conference organised by the College of Europe.
She said while the preliminary findings showed that some capacity mechanisms were necessary in the short to medium term, others may not be.
“Unfortunately, the sector inquiry suggests that capacity mechanisms are sometimes seen as quick-fix solutions – as alternatives to real market and regulatory reforms,” Vestager said.
“If, for example, consumers were given a stronger incentive to respond to price increases and demand peaks, they would reduce their consumption and there would be less need to introduce a mechanism to support peak power plants.”
The Commission will present an interim report early next year. Sector-wide investigations such as those in the pharmaceutical and energy industries have in the past resulted in cases against specific companies.
New legislation on capacity markets is part of the executive’s plan to create an EU-wide Energy Union, a strategy to bolster the bloc’s resistance to shortages.
Energy Union is also a response to the Russian threat to EU gas supplies. The majority of Russian gas imports to the EU, about 30% of its annual needs, goes through Ukraine. In 2009, Russia turned off the taps, causing shortages in the EU.
Earlier drafts of the Energy Union suggested the Commission will legislate to fully open capacity mechanisms to cross-border investment.
In 2015 to 2016, it will publish an initiative to co-ordinate capacity markets. A review of the directive concerning measures to safeguard electricity supply security will begin in 2016, the paper said.
Commission Vice-President Maroš Šef?ovi?, in charge of Energy Union, has told EURACTIV he was still open to cross-border investment in capacity mechanisms.
But the Commission’s communication on Energy Union said capacity mechanisms should only be developed to address security of supply if a need was proved. Any assessment should also take into account the potential for energy efficiency.
Supporters of capacity mechanisms claim the model can prevent blackouts, enabling the surplus capacity to be brought online in case of a shortage or to cover consumption at peak time.
Critics counter that paying for surplus, unused power is a public subsidy for high-carbon industries, entrenching polluting fossil fuel stations for years to come.
Oliver Joy, spokesperson, European Wind Energy Association, said, "Capacity mechanisms should not be a tool to keep unprofitable and unnecessary power plants online as the European Union continues to grapple with overcapacity. They can have a distortive impact on wholesale electricity prices, which remain well below pre-2008 levels.The transformation of the European power sector must be driven by private investment and well-functioning markets. We must not keep redundant power plants on life support, particularly at a time when some countries are dealing with too much capacity. Financing conventional power plants to stay online must be a last resort option and only if member states have gaps in capacity."
"Capacity mechanism" describes a system in which power generation capacities are rewarded through financial compensation.
Supporters claim this model will prevent possible blackouts, such as on days with high demand and low wind and sun.
Under this model, compensation for secure supply is meant to help cover the costs of conventional power stations - mainly gas and coal.
Former EU Energy Commissioner Günther Oettinger has said he is critical of capacity mechanisms. "If the German government wants to take this path, then it must be a cross-border model. Otherwise it will become an undesirable cost driver," he warned.
Although capacity mechanisms are already on the daily agenda in many EU member states, Germany is still in the discovery phase.