State aid: Commission opens in-depth investigation into German plans for electricity capacity reserve

On the 7 of April 2017, the European Commission opened an in-depth investigastion to assess whether German plans to set up an electricity capacity reserve complied with the EU state aid rules.
According to the Commission's 2014 Guidelines for energy and environmental state aid, the Member state must demonstrate the need for the measure, ensure that it is fit for purpose and open to all capacity providers.
The Commission had concerned that the measure might distort competition and favour power plant operators over demand response operators.

Strategic reserves such as the German Capacity Reserve are capacity mechanisms. The Commission carried out a sector inquiry into capacity mechanisms between April 2015 and November 2016, which concluded that strategic reserves may be appropriate interventions where Member States identify temporary risks. They should be held outside the market to minimise distortions to the market's day-to-day functioning. Strategic reserves must be transitional measures, which accompany market reforms and are phased out as soon as the reforms take effect.

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