EU state aid inquiry finds energy market intervention should be last resort, but fails to focus on climate

EU competition chief Margrethe Vestager has published the final findings of her state aid for energy inquiry.

There is some good news for the climate and energy customers alike, as the legal rules proposed today call for minimal intervention in energy markets. Interventions come at a high price for consumers and have been criticised for supporting highly polluting power plants.

ClientEarth lawyer Maria Kleis said: “The Commission’ conclusions in the State aid inquiry must be interpreted in the light the new EU energy law proposals released today, and vice versa. The Commission gives a clear sign that national governments should avoid intervening in energy markets as far as possible.

“Where it is necessary, it should be temporary and light-touch. We welcome Vestager’s focus on the importance of demand-response technology, and call on her to highlight the role of energy efficiency and renewables as essential tools to cut carbon in Europe’s energy system.”

The inquiry into state aid examined 11 EU countries. Today’s legislative proposals ought to reflect its findings, which were made public shortly after all other parts of the extensive energy package.

ClientEarth lawyer Ken Huestebeck added: “Today’s legislative proposals make it clear that state aid control will still play an important role when it comes to so-called capacity mechanisms. Based on recent statements by its officials, we expect the Commission to look more closely at the support mechanisms it examined in its investigation, before the laws proposed today enter into force.

“There remains quite a lot of uncertainty about how it will do this. The Commission has approved the capacity mechanisms in Britain and recently France. However, the approval for Britain is being challenged before the European Court and the approval for France could still be contested as well.

“The Commission should now enforce that state intervention should only ever be a last resort. We welcome that it has made clearer that security of supply should be viewed from a European – rather than purely national - perspective in an integrated energy market.”

“In its final findings, the Commission seems to be more open than before to a preference for targeted, temporary solutions to energy supply shortfalls. These would also allow for better control over the environmental impacts of such mechanisms.

"Polluting power plants should not be allowed to just hibernate thanks to a capacity mechanism in times of low electricity wholesale prices, then continue running afterwards. So there should be a so-called no-return clause prohibiting them from returning to the regular market.

"Prohibiting the most climate-unfriendly plants from being subsidised capacity as proposed in the draft legislation is a step in the right direction. However, this will only apply for new plants for the first five years after the proposed law enter into force."