Tempus Energy Response to Claire Perry MP's Statement
Some aspects of Claire Perry MP's statement are disingenuous and could be accused of misleading the House. In particular Ms Perry states that:
"This judgment was decided on procedural grounds. It was not a challenge to the nature of the UK Capacity Market mechanism itself."
The case that Tempus Energy brought was a procedural challenge, because we were challenging the European Commission's decision not to launch a thorough investigation into the substance of the Capacity Market. However, the reason the Court upheld the challenge was precisely because of the serious concerns raised by the design of the scheme. Therefore, the nature of the Capacity Market was very much at the heart of the decision.
"Serious doubts" about the Capacity Market design
The European Commission is obliged to carry out an investigation if it has "serious doubts" about the compatibility of the scheme with State aid rules.
Last Thursday, the European Court ruled that the Commission should have had serious doubts about the compatibility of the scheme and was therefore obliged to conduct a formal investigation, called a "Phase II" investigation, under State aid rules.
It is not merely a case of needing to consult on the existing policy more, as Ms Perry's statement suggests. The "serious doubts" that the Commission should have had go to the core of the discriminatory and anticompetitive design of the scheme and the lack of an appropriate assessment of the potential of demand-side response to meet our capacity needs. These factors will now have to be considered in full, with evidence formally invited from all stakeholders. This is not simply a case of rubber stamping a "re-approval", as much as the government may wish otherwise.
The Court has made it very clear that the Commission may not, as it did previously, rush this process simply because it is under political pressure from the UK government:
"...the Commission may not decline to initiate the formal investigation procedure in reliance on other circumstances, such as third-party interests, considerations of economy of procedure or any other ground of administrative or political convenience." (Paragraph 63 of the Judgment)
Forcing innovators to litigate is not an effective strategy for growth
Prior to the Capacity Market being introduced in 2014, I worked extremely hard, alongside the demand-response sector and customer groups, to raise our concerns with both the UK government and the Commission, to ensure that the scheme created a level playing field and did not distort competition. This should have been ensured at the outset, but unfortunately the lobbying power of the Big 6 energy companies and their representative group, Energy UK, was too great. The final policy was designed to provide security for energy companies, not energy customers.
It was with great frustration and disappointment that Tempus Energy lodged its legal challenge in 2014, as a last resort. As a start-up, we fully sympathise with the need for investor certainty and would certainly have preferred the government and Commission to have carried out their roles properly in the first instance, rather than forcing Tempus to spend time and money on a four year battle to enforce the rights of new market entrants. I would much rather have been investing that money in building the market for flexible customers. Indeed, the challenge was lodged before the first capacity auction - to give the government one last opportunity to reconsider the design. Of course nobody expected that it would take four years to reach a conclusion.
An opportunity to get it right for customers
However, now that the Court has struck down the Commission's approval of the Capacity Market, the focus must now be on assisting the Commission to conduct the genuine, in-depth investigation that it should have undertaken in 2014 to address the serious concerns recognised by the Court. Whatever has come before, our mission remains the same and we must not be distracted by the claims that the scheme is now "too big to fail". With £23.4bn of customers' money to be committed over the next 10 years, we cannot afford not to get this right.
The need for demand flexibility in the energy system, to balance intermittent renewables and deliver security of supply at the lowest cost to customers, is more urgent than ever before. This is a critical opportunity to finally get our energy policy right, so that demand-side response, storage and renewables can work together to provide cleaner, cheaper capacity.
This is a second chance to lock out fossil fuels and lock in long-term energy system efficiency and economic growth in the British clean-tech sector.
It has not come a moment too soon.
Sara Bell, CEO and Founder