Subsidies to Prevent Power Blackouts Probed by EU’s Vestager

The European Union’s antitrust chief is starting a probe into whether subsidies governments offer power plant operators to avoid blackouts distort competition.

Margrethe Vestager said she wants to ensure that public support for electricity supplies doesn’t unfairly favor some producers or technologies or thwart cross-border trade. Some EU countries, including the U.K., offer power companies payments to keep their plants ready to run during times of peak demand.

“In some cases it might be more efficient to invest in improving electricity grid connections between EU countries than to build new power stations,” Vestager said Wednesday in a statement.

Improved cross-border power links are among the pillars of the EU’s Energy Union strategy, approved by national leaders in March. The plan is to ensure safer energy supplies, better integrate renewables into the grid and invest in infrastructure.

Vestager has made energy-market competition a priority in her first months in office. Last week, she attacked OAO Gazprom’s pricing structure throughout the eastern part of the EU, further straining political relations between the 28-nation bloc and Russia.

So-called capacity mechanisms supplement intermittent supplies of renewable energy as falling wholesale power prices makes running some conventional plants unprofitable.

The European Commission authorized the U.K.’s capacity market program in 2014, saying it was in line with subsidy rules. Utilities that receive capacity payments would be able to provide electricity at a lower cost, giving them an advantage over competitors in countries that don’t offer the subsidies.

Supply Security

While payments may be necessary for supply security, they must not distort the market, the EU said in its energy union strategy unveiled in February.

The sector inquiry will initially request information on a sample of EU states that have capacity mechanisms in place or are considering them, namely: Belgium, Croatia, Denmark, France, Germany, Ireland, Italy, Poland, Portugal, Spain and Sweden.

The Brussels-based commission has the power to ban and order the recovery of selective public subsidies that distort competition. In cases of market failure, the EU can depart from these rules.

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