Electricity generators will receive around £1 billion in back payments in January after the European Commission said the UK’s Capacity Market does comply with state aid rules.
The European Court had suspended the scheme after Tempus Energy claimed it put demand-side response players at a disadvantage.
But the European Commission said: “Notably, the commission did not find any evidence that the scheme would put demand response operators or any other capacity providers at a disadvantage with respect to their participation in the scheme.”
Sara Bell, Tempus’s founder, accused the European Commission of having “caved to industry pressure”, while Tempus added that it will be “studying the judgment to determine what to do on behalf of consumers who deserve better than this”.
Trade body Energy UK welcomed the decision, while Chief Executive Lawrence Slade adding: “The Capacity Market can now continue to do the job it has done successfully for a number of years, ensuring security of supply at the lowest cost to customers in times of high demand.”
But Jonathan Marshall, Head of Analysis at the Energy & Climate Change Intelligence Unit think tank, argued there remain “major doubts if it is the right tool to deliver low-carbon electricity during the 2020s” and said it continues to shut out innovative and disruptive technologies.