April 14. 2024. 6:53

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Nuclear tops Poland’s wish-list for EU electricity market reform

EU countries should have “an unrestricted right” to subsidise power plants providing dispatchable electricity in case wind and solar are unavailable, according to a non-paper circulated by Warsaw ahead of EU proposals next month to reform the bloc’s electricity market rules.

“We must ensure a positive regulatory environment for investing in all zero- and low emission technologies,” says the non-paper, obtained by EURACTIV.

“Technology neutrality should be the cornerstone of the reform,” it says in reference to an EU principle stating that laws and regulations should not be biased towards or against a specific technology.

“This is especially important for nuclear power projects,” the document adds, saying this is valid both for large-scale nuclear plants and small modular reactors (SMRs), “which are characterised by high upfront capital costs and fairly long construction periods”.

France is in support of the measure.

“Renewables are not the only answer to decarbonisation,” said French energy transition minister Agnès Pannier-Runacher. “Nuclear is one, too, because it provides stable low-carbon energy, which makes it possible to manage the intermittency of renewables,” she told journalists in a phone briefing on Thursday (2 February).

Electricity prices skyrocketed across Europe last year as Moscow turned off the gas tap in retaliation for EU sanctions imposed against Russia over its military aggression in Ukraine.

The European Commission is currently preparing a review of EU electricity market rules, arguing that the EU power market “does not work anymore” and needs to be adapted to the “new realities of dominant renewables” and higher gas prices.

The reform will aim to ensure that all European consumers can benefit from cheap renewable electricity, the Commission said last month as it launched a public consultation about the reform.

EU launches debate on electricity market reform amid rising consumer bills

European Union proposals to overhaul its electricity market will attempt to better protect consumer energy bills from short-term swings in fossil fuel prices, the European Commission said on Monday (23 January).

Capacity market reform

As part of the reform, Poland’s priorities are clear: EU countries should have their hands free to subsidise electricity generation capacity as back-up to intermittent wind and solar.

And with a growing share of renewables being added to Europe’s energy mix, “there is a need for stable and dispatchable sources of supply to cover demand at all times,” Warsaw added in reference to so-called “capacity mechanisms” that allow EU governments to subsidise back-up power generation.

For Poland, it is “of predominant importance” to secure capacity markets for the long term in order to “deliver sufficient amount of dispatchable sources” of electricity “to allow subsequent decommissioning” of the country’s fleet of coal-fired power plants.

Capacity markets “are currently considered a temporary instrument of last resort and require a complex approval process,” the Polish non-paper notes. Instead, they “should be treated as a permanent feature” of the EU’s electricity market design, “and member states should have an unrestricted right to implement them”.

Capacity mechanisms were last reformed in 2018 at the EU level after a heated controversy around the ability of EU countries to subsidise coal power plants that remain on standby as a backup for wind and solar.

Such “peak generators” are considered vital to avoid blackouts during winter when electricity demand is highest but they would be unprofitable without state support.

For the first time, the reform placed a limit on coal subsidies by introducing a CO2 emissions performance standard of 550g per kilowatt hour on all new power plants and a 2025 cut-off date for coal support.

However, a special “grandfathering clause” was added, allowing Warsaw to continue subsidising its existing coal plants after that date, provided capacity contracts with energy suppliers were concluded before 31 December 2019.

According to the Polish non-paper, the reform should now go further and include “a transitional extension of the derogation from the emission limit of 550 g CO2/kWh after 2025, in order to limit the volume of natural gas consumed by the power sector and to ensure baseload capacity” until low-carbon electricity and storage solutions are deployed.

EU forges deal on coal phase-out, with special Polish clause

European Union legislators reached agreement in the early hours of Wednesday (19 December) over a proposed reform of electricity market rules that includes a 2025 cut-off date for coal subsidies, and a special clause for Poland.

Georg Zachmann, a senior fellow at think-tank Bruegel, said it was “very useful to have these non-papers” because they help get a better understanding of how EU countries position themselves in the debate over the reform of the EU’s electricity market.

“The main focus of the paper is to ensure that the national design of instruments to fund investments in politically desired technologies – in particular nuclear – is not constrained by European rules,” Zachmann told EURACTIV in emailed comments.

“How this squares with an efficient development and operation of the European power system is not spelt out,” he added, however.

> Read the full paper below or download here.

Electricity Market Design -Polish non-paper