Standard content for Members only
To continue reading this article, please login to your Utility Week account, Start 14 day trial or Become a member.
If your organisation already has a corporate membership and you haven’t activated it simply follow the register link below. Check here.
“It usually only happens in the movies”, was how one demand-side response champion characterised the shock news that rocked electricity’s capacity market this week.
But while the unexpected victory of “the little guys” over what has been termed in some quarters as the “unbelievable lobbying power” of giant fossil fuel generators may do well at the box office, in practice the landmark European court ruling has wielded a devastating blow to the sector.
The court reversed the European Commission’s earlier ruling that the capacity market did not infringe state aid rules, and for those energy businesses hit by the decision it must feel like a plot twist from a badly written disaster film.
Certainly, the immediate and indefinite suspension of the mechanism means those who had been directing the story are not in line for any plaudits.
The government has been forced to put on hold upcoming T-1 and T-4 auctions, and around £1 billion of capacity market payments under existing agreements for 2018/19 now look in peril. Many contract holders are facing potentially significant gaps in their balance sheets and major investment uncertainty lies ahead.
Although the energy secretary described the judgement as a procedural matter, rather than a reflection on policy or the market itself, few observers agreed. Meanwhile, a spin-off production being trailed is that government could now face legal action for damages from 29 million consumers.
It’s a cliff-hanger that the embattled industry – already navigating the effects of the price cap, late Renewables Obligation payments, the challenge of unpredictable consumer demand and a relentlessly volatile political and economic climate – could have well done without.
And in a week of ongoing Brexit tumult in Westminster, it was hard to miss the irony of a European court diktat arriving unannounced to throw Britain’s capacity market into chaos.
While Greg Clark was on his feet in parliament battling for the limelight as he unveiled new policy principles around decarbonising generation, proclaiming that the energy trilemma was now over and urging industry to “shout it from the rooftops”, those at the sharp end were left fearing just what next week’s sequel might bring.
Please login or Register to leave a comment.