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Capacity remuneration mechanisms: new rules, new problems?

In: Research Handbook on EU Competition Law and the Energy Transition

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  • Kaisa Huhta

Abstract

This chapter overviews the legal approach to capacity remuneration mechanisms in the European Union (EU). Capacity remuneration mechanisms are legal frameworks adopted by Member States to ensure resource adequacy, which refers to the ability of all generation resources to meet electricity demand at all times. In practice, these frameworks create state-driven economic incentives for electricity producers to invest in new generation resources or to keep existing resources available when doing so would not necessarily be profitable in the energy-only market. In EU law, capacity remuneration mechanisms are considered state aid, which, if poorly designed, can severely undermine competition and the functioning of the internal energy markets. This chapter analyses the evolution of state aid cases on capacity remuneration as well as the secondary rules on capacity mechanisms adopted as part of the 2019 Clean Energy for All Europeans package.

Suggested Citation

  • Kaisa Huhta, 2024. "Capacity remuneration mechanisms: new rules, new problems?," Chapters, in: Leigh Hancher & Ignacio Herrera Anchustegui (ed.), Research Handbook on EU Competition Law and the Energy Transition, chapter 17, pages 347-363, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:21531_17
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    File URL: https://www.elgaronline.com/doi/10.4337/9781803922591.00025
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