The European Commission has opened an investigation into the way 11 EU governments subsidise utilities to ensure against blackouts, concerned that such support schemes may breach state aid rules.

Capacity mechanisms are used in some EU countries to fund electricity generation that may not be cost-effective, but is needed to guarantee supply during peak demand.
European Competition Commissioner Margrethe Vestager
The mechanisms reward gas and coal-fired power producers in the main as a contingency in case supply security is threatened. In theory they can prevent blackouts by maintaining surplus capacity to be brought online in case of a shortage or to cover consumption at peak time.

The European Commission said it would ask Belgium, Croatia, Denmark, France, Germany, Ireland, Italy, Poland, Portugal, Spain and Sweden for information on existing schemes or their plans to set up one.

It will also seek details from electricity generators, suppliers and network operators. A draft report is expected around the end of the year and a final report in mid-2016.

“This sector inquiry sends a clear signal to member states to respect EU state aid rules when implementing capacity mechanisms, and contributes to the Commission’s goal to build a true Energy Union in Europe,” European Competition Commissioner Margrethe Vestager said.

The sector inquiry aims to consolidate the Energy Union’s objective of ensuring capacity mechanisms only being developed to address security of supply if a need was proved. Any assessment should also take into account the potential for energy efficiency.

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