First auction of Polish capacity mechanisms sinks billions of euros into subsidising the country’s addiction to coal
- Category: Press Releases
- Published: 20 November 2018
The Polish electricity grid operator has just published the official preliminary results of the first capacity market auction in Poland to award contracts to power plants from 2021 onwards. Capacity mechanisms, which are supposedly intended to ensure supply in case extra power is needed, are often used as backdoor subsidies for the most uneconomic power plants, which are also the least efficient and most polluting. As such, they are a source of additional profit for the utilities on top of their regular revenues from the actual supply of electricity.
Capacity mechanisms are estimated to add almost 58 billion euros to energy bills across the European Union. The Polish capacity market is projected to cost Polish taxpayers up to 14 billion euros until the year 2030. The results of the first auction today confirm that the system is designed to maintain the status quo in the country’s coal-based energy system.
Based on the preliminary results, out of 22,4 GW awarded through the auction at least 80% goes to coal and lignite. Contracts will be set at the staggering amount of approximately 55 euros per kW, the price being more than five times higher than the one set by recent UK auctions. These plants will receive payments via even up to 15 year-long contracts starting from 2021.
Within the auction, more than 3,6 GW of coal plants have secured such extensive contracts that will provide them with public subsidies until the end of 2035. This includes four new units currently under construction and an additional unit that has been operational for a year now, but is still treated as “new” by Polish legislation in order to be eligible for these subsidies for the next 15 years. By the end of the contracts these 3,6 GW of plants will receive an estimated 3 billion euros. This means that Polish taxpayers will foot the bill for about a half of total construction costs of these new plants.
Unless the EU excludes polluting power plants from receiving capacity mechanisms subsidies, this economic and environmental non-sense is set to continue. At the upcoming and final negotiations between the European Council, Parliament and Commission scheduled on 5th December, which coincides with the COP 24 climate summit in Poland, EU leaders have the opportunity to stop this and recover climate leadership on the international scene.
Joanna Flisowska, Coal Policy Coordinator at Climate Action Network (CAN) Europe said:
“This is a huge sell-out to the Polish coal utilities at the expense of Polish taxpayers and the climate. The European Council needs to take a stand to end the use of capacity mechanisms to support coal in the ongoing negotiations on the electricity market design. It is outrageous that billions of Euros of public money could go up in smoke subsidising coal plants until 2035 at the expense of our health and climate. The upcoming trialogue is the last chance of preventing these massive coal subsidies and the EU has to make a choice whether it wants to accelerate the clean energy transition or hinder it. “
The fate of the planned new Polish coal plant Ostroleka C is still uncertain. This project is still hoping to secure its 15 year-long subsidies through the next capacity market auction planned for the end of December. The project struggles to secure funding and new rules precluding capacity payments to electricity producers emitting more than 550gr CO2/kWh, if adopted in the ongoing trialogue, could still spell the end of Ostroleka C even before its start.
Flisowska added: “The forthcoming COP24 climate summit, with all eyes set on the Polish host, is the time for Poland to show the way towards a 1.5°C compatible future. This is not possible while subsidising its own addiction to coal. Instead of wasting citizens’ money on coal plants proven to be as unprofitable as they are unnecessary, Poland needs to commit to the inevitable and urgent energy transition beyond coal.”
Climate Action Network (CAN) Europe is Europe's leading NGO coalition fighting dangerous climate change. With over 150 member organisations from 35 European countries, representing over 1.700 NGOs and more than 40 million citizens, CAN Europe promotes sustainable climate, energy and development policies throughout Europe.