The Commission has published a new report on the current process for approving capacity mechanisms in the EU (COM/2025/65). Capacity mechanisms is support offered by EU countries to remunerate capacity resources (e.g. generators, demand response, storage units) to ensure security of electricity supply.
Alongside this report, the Commission has published proposals to simplify the approval process for capacity mechanisms. These are included in the draft Communication on the Framework for State aid measures to support the Clean Industrial Deal, called the Clean Industrial Deal State Aid Framework (CISAF).
Both the report and the proposals aim to simplify procedures for EU countries, for instance, by setting their reliability standards based on centralized calculations of ACER (Agency for the Cooperation of Energy Regulators), and by demonstrating the need for a capacity mechanism based on ERAA’s central reference scenarios), at the same time, ensuring compliance with sectoral legislation and state aid rules.
Both the report and the proposals are integral parts of the EU Electricity Market Design reform, which mandates the Commission to report on, and propose ways to simplify the process of assessing capacity mechanisms (Article 69(3) of the Electricity Regulation).
In evaluating the current approval process, the report focuses on the methodology for the European Resource Adequacy Assessment (ERAA methodology), approved by ACER. The report also focuses on the design principles for capacity mechanisms in line with the Electricity Regulation and State aid guidelines.
The report indicates that the Commission will call on ACER to amend the ERAA methodology as appropriate and in cooperation with the European Network of Transmission System Operators for Electricity (ENTSO-E). The purpose is to simplify the methodology in areas that are proven to be difficult to implement. This also gives EU countries more flexibility when justifying that such a capacity mechanism is necessary. It does so by making it possible to rely on an additional a central reference scenario under ERAA.
The Commission’s request to ENTSO-E only defines the scope of such a simplification of the methodology. It will then be for ENTSO-E to submit the detailed draft proposals of the methodology for ACER’s approval, a procedure that would then take up to nine months (in line with Article 27 of the Electricity Regulation). The procedure involves consultation with EU countries through the Electricity Coordination Group (ECG), with other stakeholders such as transmission system operators and with national regulatory authorities.
The report also indicates that the current process for approval of capacity mechanisms generally has a minimum duration of 6 months, but pre-notifications discussions with EU countries tended to last longer in the past. To address this, under, the Commission submits its proposals on a simplified State aid procedure for capacity mechanism designs that follow pre-defined off-the-shelf target models based on best practice and that can therefore be expected to limit distortions to competition (under Annex 1 of the draft CISAF Communication and in line with Article 69(3) of Electricity Regulation). This simplified procedure enables swift approval by the Commission if EU countries confirm that all requirements are complied with. EU countries are consulted on these CISAF proposals ahead of their adoption, as part of a public consultation launched on 11 March 2025.