Capacity mechanisms complicate agreement on new electricity market design. Will they also apply to coal plants?

The proposed new electricity market designis being complicated by a dispute over the future form of capacity mechanisms. The new proposal would allow coal-fired power plants to receive support under predefined conditions. The move is being criticised primarily because it conflicts with the European Union’s environmental policy. 

The European Union is currently preparing a proposal for a new electricity market design that should prevent a repeat of the energy crisis of 2021 and 2022. However, the proposal also aims to adapt the market to new environmental targets, including a 55 % reduction in CO2 emissions by 2030 and achieving climate neutrality by 2050.

Considerable controversy has therefore been sparked by a proposal from Sweden, which suggested an exemption that would allow coal-fired power plants to participate in capacity mechanisms. Naturally, a number of countries, led by the Netherlands, oppose the exemption. Poland, whose energy sector is based on electricity generation from hard coal and lignite, is among its supporters.