Temporary CAT mechanism to be extended through 2016

A temporary CAT mechanism initially intended for the current year will now be extended to cover 2016 as a result of the government’s admission that it cannot deliver a finalized permanent CAT plan by the new year as a result of revisions required in the wholesale market.

Independent electricity producers, affected by a poor year, should not expect to receive any retroactive payments covering output in 2015, following European Commission opposition to retroactive payments through the temporary CAT system.

An amount ranging between 200 million and 250 million euros is expected to be provided for the temporary CAT mechanism in 2016, to be paid out to gas-fueled power stations, both independent units and ones operated by PPC, the main power utility.

The permanent CAT mechanism is expected to be implemented in 2017, assuming certain required revisons are made in the wholesale market, such as the abolishment of a 150-euro per MWh limit, as well as measures to  facilitate imports.

Once in place, the permanent CAT mechanism is expected to compensate power stations offering flexibility to the grid with an amount that could reach as much as 500 million euros per year. Besides gas-fuled power stations, hydropower stations will also qualify for the permanent CAT mechanism, following a European Commission proposal. Lignite-fired power stations will be excluded as it has become apparent the country’s grid will need to manage greater fluctuation in production levels as a result of the renewable energy source (RES) sector’s increased role being anticipated. The new CAT mechanism is expected to be applied for a period of either two or three years.

The energy ministry is planning a seminar for next Friday to present the latest electricity market developments.