State aid for energy generation projects: UK Government may struggle to satisfy EU Commission’s “market failure” test

This article considers the difficulties that member states can face in satisfying the requirements of the EU state aid rules when looking to incentivise investment in energy generation projects.

Key Points

• The UK Government’s efforts to incentivise urgent investments in new low carbon generating capacity are facing difficulties because of the EU state aid rules.
• The twin requirements of “market failure” and “proportionality” are difficult to satisfy when granting long-term subsidies or income guarantees with a view to de‑risking individual energy infrastructure projects.
• A fresh approach may be needed for evaluating EU member states’ interventions in the energy field.

This article was first published by Butterworths Journal of International Banking and Financial Law (JIBFL)