Believe it or not, the EU can look to the US for inspiration on ending coal subsidies

Energy transition| Financing the transition

In January this year, the Federal Energy Regulatory Commission (FERC) of the United States unanimously rejected proposals by the Trump administration that would have allowed coal subsidies under the guise of energy “resilience”. This is exactly the principle that should now guide EU legislators, writes Joanna Flisowska.

Joanna Flisowska is coal policy coordinator at Climate Action Network Europe (CAN Europe), an environmental pressure group.

Originally published by EURACTIV on 6 March 2018.

This week, the European Parliament is going to finalise its negotiating position on reforming the EU’s internal energy market – a major component of the Clean Energy for All Europeans package. Everyone agrees that this is a once in a generation chance to reform the rules of the EU’s electricity market to ensure that clean technologies are not blocked from competing by large incumbents. If we fail to get these rules right, Europe’s low carbon energy transition will suffer a major setback. So it is good news that MEPs put forward a progressive position on the file.

A particularly welcome development is that MEPs support the Commission’s “550” legislation. 550 may sound like a random number but it is incredibly important. Ensuring that power plants emitting more than 550gCO2/kWh are prevented from receiving new subsidies through what are known as “capacity mechanisms” to stay online would mean that a significant number of Europe’s 253 operational coal plants (which collectively emit around 15% of the EU’s CO2) would become uneconomic.

Hastening the exit of the more marginal coal plants from European grids would enable the deployment of cheaper, cleaner and more efficiency technologies – opening up a gap for demand response technologies and battery power to fill, for example.

Sadly, last December, energy ministers in the Council adopted a very backward-looking general approach which kept the door open to delivering yet more subsidies to coal power through poorly designed capacity mechanisms. This is despite all member states’ support for the 2015 Paris Agreement and despite the fact that seven member states have now announced coal phase outs.

So policymakers in the Commission and MEPs need to gear up to defend the 550 legislation in trilateral negotiations, set to begin shortly. The stakes are high.

But, believe it or not, in supporting an end to coal subsidies, MEPs and Commission officials can take inspiration from the US, where the Federal Energy Regulatory Commission (FERC) – the US body that is supposed to ensure just, reasonable and non-discriminatory prices in the federal US electricity markets and that has been stuffed with Trump appointees in recent months.

In January this year, FERC unanimously rejected US Energy Secretary Rick Perry’s highly politicised plan to change the rules of the energy market to require buyers in the competitive market regions to ensure “full cost recovery for power plants with a 90-day supply of fuel on hand” under the guise of increasing “resilience.”

This would have been nothing more than a simple – publicly funded – handout to uneconomic coal and nuclear plants. And it is precisely the kind of mechanism that we need to be ending once and for all in Europe.

In rejecting the proposed rules, one of the FERC commissioners, Richard Glick, put it like this:

“The proposed rule had little, if anything, to do with resilience, and was instead aimed at subsidising certain uncompetitive electric generation technologies…it is important to consider the resilience of the bulk power system in a larger context that accounts for the changing electricity industry rather than seeking to preserve the status quo.”

This is precisely the principle that should guide MEPs through the trilogues when they start in the coming weeks. If we allow these new forms of fossil fuel subsidy to extend the lives of dirty coal plants that would otherwise retire, the EU will fail in its climate mission – and will end up burdening European consumers with higher bills and poorer health in the meantime.