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EU puts German capacity reserve plans under microscope

Germany’s plans to set up a 2 GW capacity reserve may be checked by a European Commission state aid investigation.

The commission are investigating whether Berlin‘s plans breach state aid rules by distorting competition and favouring power generators over demand side response.

“We currently have a number of concerns regarding the need and design of the German strategic reserve,” EU competition commissioner Margrethe Vestager said as she announced the investigation.
Margrethe Vestager
The plans would require German transmission system operators to buy 2 GW of capacity that would be held in a strategic reserve outside of the market, starting in winter 2018/2019 and lasting initially for two years.

“The extra capacity would be used as a strategic reserve for…extreme and unforeseen circumstances, when the electricity market does not manage to deliver enough power to meet all demand,” the EC said.

However the commission has expressed doubt as to whether the reserve is required and has pledged to examine Germany’s claims for future electricity demand and supply.

It said the initial two-year, 2 GW reserve could be renewed and enlarged over time, so that even if it is confirmed as needed today, it may still exist when it is no longer needed.

Germany may also have not carried out all the possible market reforms needed to ensure supply security at the lowest possible cost without state intervention, it said.

“Even if capacity measures are well designed, they cannot replace essential electricity market reforms,” it said.