Our response to the Commission consultation on capacity mechanisms development

Public consultation in relation to the Commission communication "Making the internal energy market work"

We broadly agree with the general findings of the EC Communication on the internal energy market and the consultation document. National and inward looking energy policies can jeopardise the implementation of the European internal energy market, and therefore a European-level framework and coherent energy policies are required to enhance the internal energy market. We welcome the consultation on generation adequacy, capacity mechanisms and the internal energy market and find the consultation document and the set of questions very relevant and topical.

However, the communication and the consultation document lack a deeper analysis of the reasons behind the current situation. The current situation is taken as given, while it would be useful to analyse the background in more detail and assess whether there is anything else that could be done – with the exception of implementing capacity mechanisms – in order to alleviate the situation. Multiple and overlapping energy political priorities, uncoordinated national renewable subsidy schemes, priority treatment of renewable energy in the electricity system, national CO2 taxes, regulated end-user prices and other incentives and restrictions are the root cause for current market failures. There needs to be a clear commitment to start working on those issues. Trying to cure regulatory failures with a new set of regulations will not cure the original disease.

From the internal market perspective, it is detrimental to design capacity mechanisms or other incentives solely from the point of view of one Member State. Even if the outcome for each individual country would be optimal, it does not follow that such a system would be optimal for the whole system – from the internal energy market point of view. Our assessment is that the EU internal energy market is now genuinely at a crossroads: either the EU rapidly changes course and starts putting Member States back on track in terms of national measures and starts to align the overlapping support instruments and policy targets or we will very soon see a rapid deterioration of the basis for the common EU energy market.

We call for a pragmatic approach in going forward with the internal energy market. First, we need to push for full implementation of the internal energy market by 2014, in line with the European Council request. Secondly, the EC needs to establish a common EU

approach and legislative base for the Capacity Remuneration Mechanism discussion. Finally, we need to agree on the post-2020 energy policy framework in line with the overall 2050 decarbonisation target, in order to decrease the investment uncertainty that the energy industry is facing today as a result of unclear regulatory priorities. An important issue in this regard is to eliminate uncoordinated and overlapping targets and measures.