Europe: consider interconnection before paying new generation

Power supply security should be considered across Europe and not in national bubbles, the European Commission has advised.

Member states should assess the potential for interconnection, smart metering and demand-side management before intervening to promote extra generation capacity, according to guidance published on Tuesday.

This could be a sticking point for the UK government’s Electricity Market Reform package getting State Aid clearance from the Commission.

The UK government is one of several in Europe planning a capacity mechanism to make sure there is enough generation capacity to back up intermittent renewables. Its proposed Capacity Market design allows demand-side operators to compete with generators for payments but does not cover interconnection.

The guidance document said “far-reaching public intervention to address generation adequacy can be expensive” and the Commission requires Member States to provide “a thorough generation adequacy assessment” before it can approve their plans.

It also noted: “Intervention in support of domestic generation capacity may have the effect of deterring investments in new cross-border interconnectors that may represent a more efficient solution for ensuring security of supply.”

The communication sets out how member states can “make the most of public interventions” without distorting the EU-wide internal energy market. It also stresses that financial support for renewables should be “limited to what is necessary” and gradually expose technologies to market prices.

EU energy commissioner Günther Oettinger said: “The ultimate aim of the market is to deliver secure and affordable energy for our citizens and business. Public intervention must support these objectives. It needs to be cost-efficient and be adapted to changing circumstances.”