UFE commits and reacts to the European Commission inquiry on the French capacity mechanism

Following the launching of an in-depth investigation by DG COMP specifically targeting the French capacity mechanism, UFE submitted a response, stressing that all the actors it represents are convinced of the need for a capacity obligation mechanism to ensure the security of supply of French consumers and ultimately Europe. As such, UFE considers that, should changes to the French capacity obligation mechanisms be considered, the implementation of the mechanism as from 2017 is crucial.

A mechanism fully compatible with the internal market

Whilst the European Union seems to consider in its statement of objections that the capacity mechanism constitutes state aid, UFE recalls that its conception, which stemmed from a comprehensive consultation with the stakeholders, actually minimizes as much as possible the involvement of public authorities.
Moreover, UFE considers that the capacity mechanism is fully compatible with the internal energy market and only aims to complement it. If it the latter deal with the delivery of power energy, the capacity mechanism only remunerates the availability of generation and load reduction capacities, based on their contribution to the security of supply. Thus, it does not influence the way actors make their offers on the energy market.

An indispensable mechanism to ensure long-term security of supply

UFE is convinced of the need for a capacity mechanism in order to ensure the security of supply of French consumers and ultimately European ones.

Besides, we notice that today, in the majority of Member States, a capacity component dedicated to the security of supply complements the energy market. Amongst the countries with which France is directly interconnected, we can mention the Spanish capacity payment, the Italian capacity payment, the Belgian strategic reserve, the German reserve, the Supplemental Balancing Reserve as well as the UK capacity market. Other European states have, or are about to introduce capacity mechanisms, particularly in Greece, Ireland (capacity payment), Poland, Sweden and in Finland (strategic reserves). The French initiative to implement a capacity mechanism with its own characteristics is far from being an isolated case!
UFE is consequently calling for the European Commission to analyze all mechanisms complementing the energy market on an equal footing, using the same analytical frame, so as to avoid any discrimination among Member States and between the operators based in these countries.

Supporting possible evolutions as long as they do not undermine the implementation as of 2017

UFE has always been open to any discussion aiming to make positive improvements to the capacity mechanism, to the incentives it may generate and to its efficiency for achieving the security of supply objective. UFE is also aware of the special attention paid by the Commission to these developments
The implementation of these improvements should however not be a prerequisite for the effective launch of the mechanism in 2017. They should be seen as guidelines for improvement, possibly based on a return of experience, but not as preconditions.
Indeed, a failure to provide market players with a quick signal concerning the future of the capacity mechanism could lead to the closure or mothballing of capacities, in proportions which could have a negative impact on the security of supply in France.