Regulators welcome the Clean Energy proposals on System Adequacy and Capacity Remuneration Mechanisms (CRMs)

20 July 2017

Today, the Council of European Energy Regulators (CEER) published a Regulatory White Paper on System Adequacy and Capacity Remuneration Mechanisms. CEER broadly welcomes the system adequacy and CRM-related proposals in the Clean Energy package, with the following key recommendations:

1.   CEER welcome the introduction of a harmonised framework for adequacy assessment at European level. This assessment should be a central element of the Internal Energy Market. It should be implemented at regional level – with consistency across regions ensured by ENTSO-E – and its results should be taken into account when putting in place a CRM. Member States or Transmission System Operators (TSOs) may contribute by providing national assessment studies, which shall feed into the regional assessment.

2.   If a CRM is introduced, it should provide a clear, transparent and credible framework to the market and for investors and should allow cross-border participation so as not to distort investment signals between neighbouring zones. The results of the adequacy assessment shall determine whether a CRM is still needed. For market-based CRMs, a stable framework seems to be sufficient as the capacity price would reflect this need, and decrease to zero if the need disappears.

3.   Explicit cross-border participation in capacity mechanisms can be an efficient way to ensure the desired level of security of supply at the minimum cost for consumers. Common rules are necessary in that regard, though they should be able to accommodate different types of CRMs and avoid undue distortions.

4.   Whilst welcoming the proposals in the  recast Electricity Regulation on existing mechanisms CEER notes that the proposal lacks a clear procedure to ensure future compliance. Regulators therefore underline the need for the process to consider the “State Aid inquiry framework” and decisions taken within that.  

This Regulatory White Paper on System Adequacy and Capacity Mechanisms is one in a series of Regulatory White Papers relevant to the European Commission’s Clean Energy proposals. All Regulatory White Papers can be found here.

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