National Grid ESO has confirmed that all Capacity Market payments for existing agreements are suspended. The forthcoming capacity auctions are also on hold. The government “hopes” it won’t have to clawback the payments already made under the policy.
“The Secretary of State has today instructed us to postpone indefinitely the upcoming T-4 and T-1 Auctions for Delivery Years 2022/23 and 2019/20 respectively, in accordance with Regulation 26(3)(a) of the Electricity Capacity Regulations 2014,” it states.
“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 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 capacity market scheme.”
It adds that government “hopes” not to have to recover payments that have already been made.
“The Government is taking no steps to recover payments at this stage, and hopes that this can be avoided. BEIS will discuss with the Commission the extent to which aid already paid may need to be recovered, as part of the Commission’s formal investigation. The final position will need to await the results of the Commission’s investigation.”
The move comes following a European Court judgment that found that the European Commission should have conducted a formal investigation of the UK’s Capacity Market plans regarding State Aid compatibility.
The case was brought by Tempus Energy, which argued that awarded generation contracts of up to 15-years was anticompetitive if demand-side response can only bid for one-year contracts.