The European General Court has suspended the UK’s subsidy scheme for back-up electricity generation, stating that the payments system should be subject to a state aid investigation. The judgement imposed this on the UK’s capacity market, which guarantees power companies additional payments for supplying power during periods when demand is high.
The Court stated that the European Commission was wrong to approve the capacity market when it was introduced in 2014 because it may not have been compatible with EU rules on state supports.
The UK Government is now barred from holding auctions scheduled for early next year and from making payments under the mechanism pending an investigation by the European Commission. This is likely to damage companies’ plans to invest in increased back-up generation for the grid.
A spokesperson at the Department for Business, Energy, and Industrial Strategy said that the UK Government was “disappointed with this judgement”, but added that it “poses no issues for our security of supply.” They said: “We have prepared for all outcomes, and we will be working closely with the commission so that the Capacity Market can be reinstated as soon as possible.”