Late push for coal subsidies upsets EU deal on energy reforms

[June 19, 2023]  By Kate Abnett

LUXEMBOURG (Reuters) -A late proposal to extend subsidies for coal plants has upset European Union countries' plans on Monday to approve a reform of the bloc's power market, which was designed to shift the electricity system towards cleaner energy.

EU countries' energy ministers meet in Luxembourg on Monday to agree a joint stance on new EU power market rules, aimed at expanding low-carbon power and avoiding a repeat of last year's energy crisis, when record-high gas prices left consumers with soaring energy bills.

The proposed reform aims to make power prices more stable and predictable, by putting new state-backed renewables and low-carbon nuclear plants onto fixed-price "contracts for difference". Ministers need to iron out details like how to spend any revenues raised by these subsidy schemes.

But the talks have been complicated by a late proposal by Sweden, which holds the EU's rotating presidency, to allow countries to prolong capacity mechanism subsidies for coal power plants, under which they are paid to keep enough power generating capacity on standby to avoid blackouts.

Poland - which could prolong its support scheme for coal plants beyond 2025 under the proposal - on Monday urged other governments to understand individual countries' energy security needs.

"For some of us, security means capacity markets," Polish Climate Minister Anna Moskwa said.

But governments including Germany, Belgium and Luxembourg pushed back, as the proposal threatened to thwart a deal on the overall power reforms.

"It is not compatible with the EU's and national climate protection targets," German Economy and Climate Minister Robert Habeck told reporters.

Luxembourg's Energy Minister Claude Turmes called the proposal "astonishing", while Austria's energy minister said a meeting of 14 countries on Monday morning - among them Spain and Ireland - had included "very critical voices".

Headframes at Chwalowice coal mine are seen at dawn in Rybnik, Poland October 21, 2022. REUTERS/Kuba Stezycki/File Photo

CALL FOR MORE FLEXIBILITY

French Energy Minister Agnes Pannier-Runacher appeared more accepting, calling for a solution that retained climate ambition but reflected countries' individual circumstances.

Coal is the most CO2-emitting fossil fuel. Scientists say its use must plummet this decade if the world is to avoid the most severe impacts of climate change.

Some EU countries say they need more flexibility in how fast they exit the fuel and support new industries in communities that have long relied on coal sector jobs. Poland gets around 70% of its power from coal.

The proposal, seen by Reuters, said capacity mechanisms in place before July 2019 could temporarily dodge a CO2 limit the EU usually imposes on these schemes - enabling coal plants to participate - if they fail to attract enough lower-carbon generators.

Ministers will also consider a proposal, backed by countries including Spain and Greece, to let countries recoup windfall revenues from some power plants if power prices spike - a move energy industry groups have opposed.

Once EU countries agree their stance, they must negotiate the final power market upgrade with the EU Parliament, aiming to pass the law before EU parliamentary elections next year.

(Reporting by Kate Abnett; additional reporting by Tassilo Hummel; Editing by Giles Elgood and Emelia Sithole-Matarise)

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