EU deal on power market rules and capacity mechanisms criticised for coal subsidies

The European Commission, European Parliament and EU member states have agreed to a reform of the European internal power market, which is part of the 2016 clean energy package.

The electricity market regulation also puts in place rules for capacity mechanisms which have to be “temporary and designed to address an identified resource adequacy concern”, the European Council said in a statement. Plants participating in the capacity mechanisms must not emit more than 550 grams of CO2 per kilowatt hour (kWh) of electricity. Older plants with higher emission levels are allowed to participate in capacity markets until 2025 – meaning that subsidies for old coal-fired power stations based on this mechanism will stop by then.

"It is unacceptable that the dirtiest power plants in Europe can still receive state subsidies until 2025,” said Green Party energy spokesperson Ingrid Nestle. “We need an exit path from coal instead of more production.” She also criticised the mandatory opening of cross-border connections. This would increase costs for electricity customers through higher redispatch costs resulting in higher grid charges. “There is a danger that cost increases will once again be wrongly blamed on renewables,” Nestle said.

“In the future, customers will be able to participate directly in the market as active customers, for example by selling self-generated electricity, participating in demand response schemes or joining citizen energy communities,” the Council said in its statement.

Robert Busch, head of the Association of Energy Market Innovators (bne), welcomed the further development of the European internal energy market because the new rules would make the electricity market fit for decentralised and volatile power generation. In the electricity directive, the member states, commission and lawmakers agreed to open the power market to more actors that are free to set their own prices. “This opening to all players holds great potential for new marketing opportunities for renewable energies and storage,” Busch said.

Germany’s energy transition – the move away from fossil fuels and nuclear energy to a system based largely on renewable power – is struggling with insufficient north-south power connections and increasing redispatch costs. Integrating power storage into the electricity system is also a major challenge for the future.

The agreement reached in Brussels still has to be endorsed by the Council and the European Parliament.