Capacity Payments: The final ingredient to supercharge coal

If coal plants get capacity payments, more urgent interventions would be needed to address the long list of policy gaps that favour coal.

Dave Jones

Head of Data Insights

19 February 2018 | < 1 min read

Executive summary

There is a long list of policy gaps that favour coal

A low carbon price is just the tip of the iceberg. More urgent interventions would be needed to address policy gaps, if coal plants get capacity payments.

The proposed “550” legislation has become one of the more contentious parts of the EC’s Clean Energy Package. A 550gCO2/kWh limit would ensure high carbon intensity power plants don’t get capacity payments, enabling deployment of less polluting and more efficient technologies. We are most concerned by impact of capacity payments on Europe’s 256 operational coal plants, which all have a carbon intensity greater than 550g/KWh.

On Wednesday 21st February 2018, ITRE will vote on this legislation. Voting for Compromise Amendment 22A, in the Market Design file, would stop the dirtiest plants getting capacity payments. Without this, coal plants would get supercharged, and require urgent interventions to correct existing policy gaps.

Sandbag has far written two papers to inform the proposed “550” legislation. The first paper outlines the 7 reasons why “550” legislation is needed. The second paper highlights the frightening scenario where it is not approved, and capacity payments pay to extend the design life of coal plants from 40 years to 60 years,
so they can stay open into the 2040’s; this scenario was summarised from a key paper commissioned – ironically – to argue against the 550 legislation.

In this briefing we analyse the impact of “550” legislation on policy interventions.

In Section 1 we analyse general EU policies impacting coal; in Section 2 we analyse policies specifically needed to implement a capacity market.