EU guidance for state intervention in electricity

The European Commission has published guidance for Member States on public intervention in the EU internal energy market in a Communication released on 5 November 2013. These principles will guide the Commission in assessing state interventions, enforcing EU state aid rules and proposing future EU legislation. The aim is to make state intervention more effective and efficient. The Communication targets two specific areas: renewables and back up capacities for renewables.

Key principles for renewables

In national support schemes for renewable energy Member States must note that:

• Support should be limited to what is necessary and help to make renewables competitive.
• Supported technologies should be gradually exposed to market prices as production costs fall, ultimately resulting in the removal of support. Feed in tariffs should give way to feed in premia or other instruments which incentivise producers to be market responsive.
• Governments must avoid retroactive or unannounced changes to national support schemes. They must respect companies’ legitimate expectations.
• Member States should coordinate their renewable energy policies.

Key principles for back-up capacities for renewable energy

In considering schemes to support back-up capacities for renewable energy, Member States must take into consideration that:

• Governments should analyse the causes for inadequate generation before choosing to implement capacity mechanisms.
• Governments should address factors that may reduce incentives for investment in generation capacity (e.g. regulated prices or high subsidies for renewable energy).
• Governments should ensure that renewable energy producers promote demand side flexibility (e.g. through "smart grids" and "smart metering").
• Any back-up capacity mechanism should be designed from a European perspective, rather than from a national perspective only.

Staff Working Documents

The Commission has published a series of Staff Working Documents to accompany the Communication. They cover:

• generation adequacy in the internal electricity market;
• guidance for the design of renewables support schemes;
• renewable energy cooperation mechanisms with notification forms and model agreements; and
• incorporating demand side flexibility, in particular demand response, in electricity markets.

The Commission intends to launch a consultation on the energy and environmental aid guidelines, which will be aligned with this Communication. It will also continue to talk with governments and regulatory authorities on how to apply the principles of the Communication in practice.

The Communication can be found here.

And the Staff Working Documents are here.