Exploring the System Security Veil: Uncovering Domestic Motivation to Defend Capacity Remuneration Mechanisms (CRMs)

Nation states are currently at a pivotal moment in implementing coherent and ambitious climate policies, while at the same time facing trade-offs between system security, efficiency and climate change mitigation. Capacity Remuneration Mechanisms (CRMs) are key policy instruments that touch on all these dimensions. CRMs are representative of policy instruments supporting conventional generators and different approaches to addressing system security issues and related trade-offs. They have potentially serious implications for neighbouring markets and can be detrimental to the fight against climate change. While these mechanisms are primarily designed to address system security concerns in the face of increasing shares of renewable energy, their national variations cannot be entirely attributed to such functionalist concerns. This paper builds on a novel liberal intergovernmentalist account, enriched by political theories, to uncover the origins of the different national pathways, assuming that these factors ultimately lead to the different bargaining positions. This approach aims to go beyond the simple notion of path dependence, but rather seeks to disaggregate the domestic determinants that lead to the national design and existence of CRM and subsequently to the negotiations outcome on the EU level. It uses a mixed-methods design to examine the underlying factors behind member states' domestic protests against the harmonisation of CRMs at the European level. It argues that the adoption and renationalisation of CRMs can't be explained exclusively by functional reasons, such as high levels of renewable energy or diminishing capacity. Instead, the trajectory of these mechanisms is hypothesised to be shaped by party preferences, the interests of national incumbents, perceptions of climate change, and varying system security concerns. This study employs statistical tests using survival and logit regressions, along with accompanying case studies. The statistical analysis is based on a newly constructed dataset compiled from official Commission documents, ACER and additional country studies that track the persistence and design of CRMs in all EU member states until 2021 to clarify the emergence and design choices of these mechanisms. The case studies assess these claims by looking at national preference formations and the different national methodologies for analysing capacity adequacy. Therefore, this paper focuses on the political factors underlying the current domestic situation to clarify the reasons for resistance in the EU negotiations and how this shaped the unlikely harmonisation outcome of restricting coal generators' participation in such schemes in the future. More generally, this paper sheds light on domestic factors that facilitate or constrain policy changes that support or prohibit more renewable energy.