EU green light to Polish capacity market is a reminder the rules need updating

Poland’s €1bn-per-year capacity market was approved by the European Commission today, after vast improvements, but environmental lawyers have queried EU rules that continue to facilitate the funding of coal power.

The capacity market guarantees ‘backup’ power. Energy providers secure contracts for providing this backup via a series of auctions. Capacity mechanisms were today approved for Belgium, France, Germany, Greece, Italy and Poland.

Poland’s approved capacity market now complies with EU State aid law. It says that preferential treatment should be given to smart energy management, storage and lower-carbon energy sources. But coal’s relative cheapness in Poland is likely to see it continue to profit hugely in future capacity auctions.

ClientEarth energy lawyer Sam Bright said: “We are pleased Poland’s capacity market now toes the EU’s line. But we see fundamental flaws in the rules at EU level. Despite its own climate targets, the European Commission can still approve capacity mechanisms that grant huge subsidies to coal operators.

“The European Commission is reviewing its rules for approving energy subsidies and needs to make serious changes. It cannot carry on allowing governments to grant huge subsidies to fossil fuels like coal. Too often, capacity payments are badly disguised coal subsidies.

“Poland’s capacity market gives encouraging nods to cleaner forms of energy but it is ultimately a framework designed to prop up coal and that’s where a big chunk of the money will go.”

The EU’s Clean Energy Package, soon to be adopted, will restrict which plants can participate in capacity mechanisms. Plants emitting carbon above a certain threshold will not be allowed to bid for contracts. In light of this, the EU specified that when the Clean Energy Package enters into force, all State aid measures – including the Polish capacity market – will need to be revisited, with a view to making them reflect and comply with these new regulations.

Bright said: “This addition was a shrewd move by the Commission and shows its ambition to keep countries EU-wide to international climate targets.”