UK Capacity Market Suspension: The Tempus State Aid Judgment, a Decision Made on Procedural Grounds

    View Author December 2018

    On 14 November 2018, the General Court of the European Union issued its judgment in Case T-793/14 Tempus Energy Ltd and Tempus Energy Technology Ltd v Commission, overruling the European Commission’s (Commission’s) decision (provided on 23 July 2014) to approve the aid scheme establishing a capacity market in the UK. Tempus is a demand side response (DSR) provider that contended that the Capacity Market scheme privileges generation over DSR in a discriminatory and disproportionate manner that goes beyond what is necessary to achieve its objectives and satisfy the state aid rules. The DSR market in Britain has increased substantially and at a fast pace, with 1,206 MW of DSR awarded Capacity Market agreements in the 2017 Capacity Market auction, up from 174 MW in the first 2014 Capacity Market auction. However, DSR only has access to one-year agreements in the Capacity Market auction, in contrast to generation, which can access three- and fifteen-year agreements.

    The effect of the General Court’s judgment was to annul the State Aid Approval for – and, therefore, the legality of granting aid through – the Capacity Market. We set out the impact of this decision in our insight on 15 November 2018 and, in this followup, we take a closer look at the General Court’s judgment and the questions which have emerged following the annulment.