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Leaked EU energy package subsidises fossil fuels, undermines renewables

November 17, 2016

By Paul Homewood 




From EurActiv:


EXCLUSIVE / The EU claims to be promoting an ambitious agenda at the Marrakesh climate conference, but its latest piece of energy legislation could subsidise new coal capacity and undermine market access for renewables. EurActiv France reports.

On 30 November, the European Commission will unveil its Winter Package, a series of legislative proposals supposedly aimed at providing “clean energy for all”, of which has obtained a copy.

These eight texts, which include revisions to directives and new regulations, are designed to put consumers at the heart of the energy market, allowing them to become electricity producers themselves. But other deep reforms to the energy market are also being considered.


Disguised subsidies for coal?

One contentious issue is the introduction of capacity mechanisms across the EU. These systems, which are already in use in several European countries such as the United Kingdom and France, allow electricity producers to earn money from their idle generation capacity.

But for environmental NGOs, capacity mechanisms are little more than veiled subsidies for fossil fuels. Indeed, the absence of a CO2 emissions cap for new electrical capacity in article 23 of the new electricity market regulation means it has potential to be used to subsidise new coal-fired power stations.

“I do not understand why we are opening the door to capacity mechanisms, because we are already at overcapacity in Europe. The German solution of making “strategic reserves” is better: with market interconnection there is no need to keep unused capacity running throughout Europe,” said Claude Turmes, a Luxembourgish Green MEP.

The Polish government is preparing its own capacity mechanism, which should be very similar to that currently in use in the United Kingdom. Copying and pasting the British system will allow Warsaw to bypass the bottleneck of European regulations on state aid, as the UK model has already been validated by Brussels. But unlike the UK, Poland is likely to use the system to strengthen the position of coal in its energy mix.

“If Poland builds new coal capacity, the credibility of the Commission is at stake. Why does the Climate Commissioner allow this?” Turmes asked in Marrakesh.


Renewables no longer a priority

And another problem: the regulation calls into question the priority market access enjoyed by renewable energies.

Priority access currently serves as a guarantee of profitability for investors in renewable energy. But under article 11 of the regulation, this could change.

For the big energy providers, the recent surge in renewable energy capacity has left a bitter aftertaste. The appearance of large-scale wind generation capacity, coupled with a slump in demand, saw the price per megawatt hour fall to below €50; less than the cost of production for most power stations.

Prices have climbed since, thanks to more sustained demand and reduced supply, with a number of French nuclear reactors not running at full capacity.

“No government has asked us to destroy the security of investments in renewable energies. If we want to reach the 1.5°C target, we don’t have a choice: we have to boost renewables,” said Turmes.

The EU executive also proposed the creation of a European energy regulation authority to supervise the national authorities.

The text says that governments “may” offer their citizens the right to produce electricity. But with no compulsory element and no guarantee of market access, the right to produce and sell renewable electricity is meaningless.

“This energy package is a gift to Poland. Pro-renewables governments like Germany are losing out, it makes no sense,” Turmes added.


Unambitious renewables objectives for 2030

And there is more bad news for environmentalists: the Commission has proposed a renewable energy target of 27% for 2030, but with no binding national targets and no effort sharing plan.

Jean-François Fauconnier, from the NGO Climate Action Network, said, “The European Commission has not understood the message of the Paris Agreement. These proposals are kilometres from what is needed to change the Paris objectives in reality.”

For 2020, the European Commission targeted 20% of renewables in the EU’s energy mix.


A few thoughts:

1) It was only a couple of weeks ago that Poland was threatening not to ratify the Paris Agreement, unless it was allowed to protect its coal industry.

As it turned out, Poland did ratify. It looks like this new package is the price.

2) The greens still don’t seem to have worked out that we need proper power stations around for when the wind does not blow and the sun does not shine. There may be overcapacity in Europe, but much of this intermittent.

3) The suggestion that renewables will lose their preferential access to market is a particularly interesting one. Without this wind and solar power would simply not be viable.

Unfortunately in the UK we are still stuck with the system of CfDs, which to all intents and purposes guarantees such preferential access.

And it is this preferential access for renewables which has led to underutilisation of other power plants, in turn leading to the need for capacity market payments.

  1. spetzer86 permalink
    November 17, 2016 3:01 pm

    The question continues to be, “why have RE at all?”. If all RE does is idle FF plants that continue to generate CO2 at a now higher cost per MWh, there’s no benefit. We’d be better off building nuclear within limits and investing in thorium research than putting in a single wind turbine.

  2. Bloke down the pub permalink
    November 17, 2016 3:03 pm

    And there is more bad news for environmentalists: the Commission has proposed a renewable energy target of 27% for 2030, but with no binding national targets and no effort sharing plan.

    An effort sharing plan of course was only viable when the UK could be expected to do most of the heavy lifting. Post Brexit, that is no longer an option.

    • Joe Public permalink
      November 17, 2016 3:55 pm

      At present, the UK is incurring extra coal-fired CO2 emissions in order to keep France’s lights on whilst some of its nukes are offline.

      An extra 1.54GW-worth as I write this.

  3. November 17, 2016 3:37 pm

    Yet again Green Politicians display their complete ignorance of anything technical.

    • Gerry, England permalink
      November 17, 2016 8:18 pm

      I think the word ‘technical’ is superfluous.

  4. Joe Public permalink
    November 17, 2016 3:49 pm

    “The greens still don’t seem to have worked out that we need proper power stations around for when the wind does not blow and the sun does not shine.”

    The greens & politicians still don’t seem to have worked out that we need proper power stations around for synchronisation when the wind & solar fluctuate rapidly.

  5. Max Sawyer permalink
    November 17, 2016 3:58 pm

    “New coal-fired power stations”. For the UK the sooner,the better – cheaper energy > lower prices for almost everything > increase in disposable incomes > boost for the economy. We just need to “get rid of the green crap” (the most sensible remark David Cameron has made or will make in his entire life).

    • November 17, 2016 5:33 pm

      Did you not get the memo stating that all socialists are hypocrites? This is of course especially true about greens above the rank and file. I understand that Greece is being paid, sorry subsidised, to build coal fired power stations. The sooner we get away from the grasp of the undemocratic EU, the sooner we can invest in clean coal technology and use the clean burning hard coal we were once renowned for.

      • November 17, 2016 7:20 pm

        If fracking ever gets going in the UK we’ll need gas-fired power stations not coal.

      • Swisspeasant permalink
        November 18, 2016 4:18 pm

        A piece in the hypocritical Guardian today saying poor families cannot afford electricity. Turns out it is not because of the Guardian, it is because they are on the wrong tariff.
        There was an advert in the middle of the article for a nice pair of gents gloves for only £195. Good to know the Guardian cares about the poor.

    • Gerry, England permalink
      November 17, 2016 8:19 pm

      Call Me Dave didn’t mean it though.

  6. markl permalink
    November 17, 2016 4:39 pm

    This is the part where they discovered sustainable energy is unsustainable.

  7. November 17, 2016 5:25 pm

    O/T but possibly worth a review…. I was looking at Bob Ward’s Twitter feed…(sad) …. I see wobblybob has re-twittered a link to the 24 month MIA technical support document for the Environment Agency’s TE 2100 mega splurge

    The technical document linked above comes I think more than 2 years after the glossy “How we’re going to save London from climate change” brochure from the EA – it’s terribly important and we’re going to need lots of money…..

    It strikes me that they decided on the heights of the sea defenses before publishing any technical justification …. seems a bit off…?

  8. Gerry, England permalink
    November 17, 2016 8:20 pm

    ‘If we want to reach the 1.5°C target, we don’t have a choice’

    Well, I don’t care about the target so the whole renewable thing is a pointless waste of money.

    • John F. Hultquist permalink
      November 18, 2016 5:14 am

      And God said “Let there be a 1.5°C target.”
      Or was it “Let there be light.”
      This religious stuff can be so confusing.

      • Gerry, England permalink
        November 18, 2016 1:51 pm

        AC/DC said ‘Let there be rock!’ and I was OK with that.

  9. roger permalink
    November 17, 2016 11:10 pm

    We seem to have signed up for the Paris agreement today according to Sky News strapline.

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