Capacity mechanisms in EU Law: A comment on the free movement of goods

The EU internal market in electricity is experiencing challenges in ensuring resource adequacy through the operation of the energy-only market alone. To guarantee the uninterrupted availability of affordable electricity, many Member States have adopted national capacity mechanisms, which compensate for the availability and readiness of existing and forthcoming generation capacity to supply electricity.  These national security of supply instruments conflict with internal market integration, and the EU legal framework established to facilitate such integration, because they tend to allocate public funding to national generation capacity instead of incentivizing cross-border solutions to ensure resource adequacy. This comment examines Member States’ capacity mechanisms in the context of the EU rules on free movement, which offer the most powerful legal means to further internal market integration. The legal analysis demonstrates that EU law acknowledges Member States’ need to intervene when the markets fail to deliver resource adequacy. However, EU law also aims to restrict such State intervention to that strictly necessary to ensure the uninterrupted availability of affordable electricity.

By: Kaisa Huhta

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