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The GB Capacity Market returns

The GB Capacity Market returns

The EU Commission approves the GB Capacity Market following an in-depth Phase 2 State aid investigation.

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Simon Virley - Partner and Head of Power and Utilities

Partner and UK Head of Energy & Natural Resources

KPMG in the UK

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Key points:

  • Following an in-depth review, the EU Commission has reapproved the GB Capacity Market (CM) meaning the mechanism is now legal and all previous agreements are reinstated with immediate effect, provided the UK Government prospectively addresses a number of conditions.
  • Generators will be relieved by this decision but some small suppliers may find it difficult to meet the CM supplier obligation as back payments for 2018/19 can now be collected from suppliers, processed by Electricity Settlement Company (ESC) and paid out to agreement holders. This process may take up to three months meaning that payments should begin by January 2020.
  • Many of the conditions imposed by the EU Commission are either reflective of existing domestic policy or restate existing legal requirements as members of the EU – so may not appear particularly burdensome to BEIS.
  • One complex condition for BEIS will be regarding the foreign participation issue. Once resolved, we expect interconnectors as a technology type will become ineligible for the CM. This will represent a hit to interconnector revenues and whilst their participation was never intended to be enduring, this could potentially have some impact on the attractiveness of future interconnection projects coming, as it does on the back of the uncertainty caused by Brexit.

Next steps:

  • Upon the publication of the decision in the Official Journal of the EU, there is a two month appeals window for any potential challenges
  • Further consultations on the CM are to be expected from UK Government
  • The implication for Tempus Energy’s judicial review (JR) claim against the UK Government in the English High Court alleging that they had failed to comply with the EU courts decision are unknown
  • The upcoming T-3 (January), T-1 (February) and T-4 (March) auctions will take place as planned in Q1-2020

Download our report for further insight on the outcomes from the EU Commission decision on the GB Capacity Market.

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