Flawed Commission analysis backs new subsidies for obsolete power plants

14 April 2016
by greenpeace -- last modified 14 April 2016

The European Commission today published preliminary findings of its inquiry into public funding schemes for power plants, known as "capacity mechanisms". The seriously flawed analysis backs these subsidies, which use taxpayers’ money to keep uneconomical power plants active.

Greenpeace EU climate and energy policy adviser Bram Claeys said: "This public financing is a foolish lifeline to failing power plants. Europe's energy market is choked with polluting coal, nuclear and gas plants that need to go. It is hard to understand why the Commission does not see renewables and flexible demand as a solution to Europe's overcapacity problem, and instead backs capacity mechanisms that further pervert the energy market."

There are too many obsolete power plants in Europe. Their overproduction forces wholesale electricity prices to rock bottom, slashing the income of big energy companies. European governments set up capacity mechanisms to allow the same companies to keep their old power plants running, under the false claim that these plants are necessary to guarantee steady energy supplies. For example, in the past two years the UK has already awarded €2.2 billion (£1.7 billion) to fossil fuel and nuclear plants.

The Commission's analysis fails to properly justify the need for these subsidies and dismisses greener alternatives. Instead of subsidising ailing fossil fuel and nuclear power plants, Europe should prioritise flexible energy use by consumers, tap into renewables that can be turned on and off when needed and create better links between energy markets.

The Commission is expected to publish its final report later in 2016. This report will feed into the Commission's Market Design Initiative, which is expected to be published at the end of 2016.

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