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European Commission Approves Czech Power Generation Capacity Mechanism

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The European Commission has approved a market-wide capacity mechanism in the Czech Republic, it said in a statement on Thursday, that will ensure there is enough generation or storage capacity available to keep up with growing demand.

The commission said it was the first such example of a capacity mechanism gaining approval under the Clean Industrial Deal State Aid Framework which it established one year ago.

The mechanism will be in place for 10 years from this month, with contracts offered for up to 15 years. It works by compensating those that make capacity available during periods when additional generation capacity is limited.

This includes existing as well as new generation assets as well as storage and cross-border capacity, the statement said. There is a provision for rewarding demand-side response, where consumers are instead paid for reducing consumption.

Eligible generation capacity must comply with EU carbon emission intensity limits, the statement noted. Awards for provision of capacity will be allocated through a competitive process.

The cost of the mechanism will be paid for by consumer charges and the total budget is estimated at between 3.1 billion euros ($3.5 billion) and 6.2 billion euros.

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