UK Capacity Market suspended following GCEU ruling on state aid approval

The General Court of the European Union has ruled that state aid funding should not have been given without a full investigation of the scheme.

15 November 2018
Today the General Court of the European Union ruled in favour of clean energy technology provider Tempus Energy, which brought a challenge against the decision to grant the UK Capacity Market with state aid approval, arguing that the funding unfairly discriminated against clean energy projects. The UK Capacity Market has entered a standstill period in the wake of the ruling, essentially preventing payments being made to electricity capacity providers under existing Capacity Market agreements. The upcoming T-4 and T-1 auctions for Delivery Years 2022/23 and 2019/20 respectively have also been postponed. 

It is understood that the Government is intending to seek separate state aid approval from the Commission to run a one-off ‘replacement’ T-1 Auction. The postponed T-4 auction is intended to be run as a T-3 auction in next year’s auction round, subject to the Commission completing its formal investigation and providing state aid approval for the main scheme.  The Department for Business, Energy and Industrial Strategy (BEIS) is understood to be liaising with the European Commission to reinstate the scheme as soon as possible, however, in the meantime, the standstill period and delays to the upcoming auction rounds will have significant implications for many UK energy market participants. 

National Grid as Delivery Body has published a set of FAQs in connection with the announcement here with several key matters awaiting further confirmation by BEIS.
  
Burges Salmon’s Energy Team is reviewing the judgment and its implications, and will publish a further update shortly.
 

Key contact

James Phillips

James Phillips Partner

  • Head of Oil and Gas
  • Energy and Utilities
  • Environment

Subscribe to news and insight

Burges Salmon careers

We work hard to make sure Burges Salmon is a great place to work.
Find out more