On 12 February 2021, the government released a proposal to amend the Act of 22 April 2019 on the capacity remuneration mechanism (the ‘CRM Act’), which has yet to fully enter into force.
The CRM Act aims to guarantee long-term security of the electricity supply after the phase-out of nuclear power. The CRM, as its name suggests, provides for capacity remuneration through a series of tenders and auctions.
The mechanism must meet European requirements, as set out in sector regulations and the State aid rules.
In order to bring the CRM Act into line with European requirements, a number of amendments have been proposed so that the first auction can take place in October 2021 on a sound legal basis.
In brief, the proposed amendments aim to:
- align the CRM Act to the rules set out in the Electricity Regulation (2019/943), which require the adaptation of (1) the regulatory decision-making process and related formalities (definition of the roles of the regulator and the TSO, etc.), (2) the reliability standard, (3) the value of lost load (VOLL) and new access costs, (4) CO2 emission standards, (5) foreign investment and (6) congestion income;
- incorporate the points expressed in Parliamentary Resolution 1220/007 of 16 July 2020, i.e. notification to the European Commission that the CRM will be financed on the basis of a public service obligation through the Elia grid tariffs (rates) as of 1 January 2025, and a pay-as-bid (rather than pay-as-cleared) pricing mechanism, especially for the first two auctions (to be re-evaluated afterwards);
- introduce a standstill clause allowing the CRM Act to enter into force in order to accommodate preparations for the first auction. Currently, the CRM Act states that certain provisions will only enter into force after notification of the European Commission's decision that the support measures contained in the act do not constitute incompatible State aid within the meaning of Article 107 of the Treaty on the Functioning of the European Union. It is proposed to allow the CRM Act to enter into force in the absence of a Commission decision in order to provide a statutory basis for preparations for the first auction. These provisions will be repealed in the event of a negative decision by the Commission.
- remedy certain gaps and ambiguities in the CRM Act. The act contains certain approximations which should be rectified. For example, it is proposed to allow only capacity for which a permit has been granted (if one is needed) to participate in an auction. The proposal also excludes the possibility of multiyear contracts for indirect foreign capacity, since long-term availability cannot be guaranteed (due to interconnectors and foreign systemic stress, which may vary over time).
- alleviate concerns expressed by the Commission with respect to the intermediate price cap, thus aligning the CRM Act to Decision SA.54915 (2019/N) – C(2020) 6415 final of 21 September 2020. The Commission found the intermediate price cap (which does not allow for exceptions) to be a new feature (compared to other capacity mechanisms it has reviewed) which could lead to the exclusion of certain capacities (e.g. those which are unable to compete for contracts with a term in excess of one year). Therefore, a statutory basis is proposed to allow for individual exceptions to the intermediate price cap.
The proposal will now be discussed within Parliament and is expected to be adopted shortly. Since the CRM is a cornerstone of Belgium’s long-term energy policy, it is essential that it be based on solid legislation. The proposal is a step in this direction.
