The electricity market design reform, launched this year by the European Commission as a response to the volatility of energy prices during the fossil fuel price crisis, caused by Russia’s invasion of Ukraine, is at risk. A last minute push to open the door for coal subsidies is diverting attention from crucial elements of this reform effort: making the European power market future-proof by strengthening the role of demand-side flexibility to replace the price setting role of fossil fuels.
The State of Play
The Electricity Market reform is back on the agenda of the Swedish Presidency, with Member States still trying to broker a deal in COREPER meetings, as they failed to reach an agreement at the Energy Council, despite day-long negotiations. This was due to a shameful amendment introduced at the last minute by the Swedish Presidency at the request of Poland. This amendment would allow new subsidies to coal power plants that started operating before 2019 to continue until 2028. Progressive Member States succeeded in blocking the proposal, rightly pointing out that such provisions jeopardise the EU’s climate objectives and may cause market distortions that not only undermine renewable solutions but also pose a significant risk to the EU’s transition away from fossil fuels.
Challenging the Amendment
Winter approaches, bringing with it a critical need to prioritise renewable energy uptake and enhance demand-side flexibility to bring down electricity prices. Despite the fact that the result of the current reform will apply only in 2024, the direction of travel needs to be set now. The Commission’s proposal of the text was focused on improving the flexibility of the power system and making customers active participants in the market, which can enable them to lower their energy bills. However, instead of advancing these crucial mechanisms, the discussion has taken an alarming turn. We now find ourselves witnessing a concerning shift towards supporting electricity generation from the most polluting fuel: coal. What is even more disconcerting is that public funds may be used to bolster this outdated and environmentally harmful technology. Therefore, it is imperative that the proposed derogation for coal subsidies is removed from the Council’s position. We need a paradigm shift and find ways to value the demand side measures as a resource, not continue supporting existing centralised non-renewable energy technologies.
The Unholy Alliance
The amendment’s origin and support raise eyebrows. The Member States who seem to be in favour of the coal subsidy amendment, clearly designed by Poland, are Romania, Cyprus, Malta, and France. While France’s stance may seem surprising – with its minimal reliance on coal and membership to the Powering Past Coal Alliance – their support for fossil energy is allegedly part of a shameful deal to obtain Poland’s support for France’s demands related to nuclear power. France must end this unholy alliance, which might jeopardise the climate agenda for years to come. Nuclear and fossil fuel-dependent countries brokering deals against renewables will only hinder the energy transition that Europe so desperately needs.
Unity in Opposition
The countries that took a critical stance and were very vocal about it ahead of the Council meeting are Austria, Belgium, Greece, Germany, Luxembourg, Spain, Portugal, and the Netherlands. This resulted in a long fight and failure in agreeing on the position. The discussion will now be continued at the ambassador’s level with the Swedish Presidency aiming to reach the conclusion before its term ends at the end of June.
Looking Ahead
In a decade that will be decisive for the acceleration of Europe’s transition away from fossil fuels, the climate agenda, and the EU carbon budget, European decision-makers must demonstrate that they are moving forwards, not backward.
This critical juncture coincides with the upcoming EU discussions on 2040 climate and energy targets, sending a negative signal to the international community. The EU must demonstrate its unwavering commitment to achieving climate targets and embracing further necessary climate action beyond 2040.
Conclusion
The return to granting state aid and subsidising coal power plants poses a grave threat to Europe’s green agenda. It is a regressive step backward that undermines the bloc’s efforts to transition away from fossil fuels. In times when the effects of the climate catastrophe are felt more and more intensely each year, with long droughts in Europe that threaten food production and people’s safety, the EU needs to stick to its course and phase out coal from electricity production.
As we stand at the precipice of a decade that will shape the future of Europe’s energy landscape, it is crucial for European decision-makers to showcase their dedication to progress. By rejecting the coal subsidy amendment and embracing renewable solutions, we can chart a path towards a sustainable, low-carbon future that benefits both the environment and our society.
