European capacity markets focus too much attention on fossil fuel-fired plants and not enough on renewable sources of security of supply, according to a report issued by research firm Aurora that was commissioned by campaign group Beyond Fossil Fuels.
Capacity markets in the six European countries that have them — the UK, France, Italy, Poland, Ireland and Belgium — have made payments totalling €89.6bn since a mechanism of this kind was first established in the UK in 2015, the report says. The mechanisms are intended to allow firm sources of generation to remain financially viable, even as increasing intermittent renewable generation reduces the number of hours that these types of plants can run profitably.
Of this, nearly half went to support gas-fired capacity and 8pc to coal-fired plants, although there is some uncertainty over precise amounts because of data unavailability. Nuclear plants, mostly in France, received 12pc of the support, while storage — located mostly in the UK and Poland — took 13pc. Renewables, interconnectors and demand-side response took only 7pc, 5pc and 2pc, respectively.
And 19GW of newbuild gas-fired plants have been funded through the schemes, with another 11GW of newbuild gas-fired plants having been awarded a contract for delivery in the next three years.
Some of the plants will continue receiving funding until the 2040s, Aurora said, putting at risk European states' plans to move towards net zero greenhouse gas emissions.
Payments for some assets in five of the countries studied continue until 2037-43, although France's unique decentralised system does not provide incentives beyond the front year.
Payments to operators of battery energy storage systems (Bess) make up only a small part of the total, even though these units can provide zero-emissions short-term energy storage.
Regulators should set up schemes to prioritise zero-emissions forms of security of supply, the report says. And alternative schemes, such as capacity reserves, in which fossil-fired capacity is kept back to resolve supply-demand imbalances but not allowed to act in wholesale markets, can ensure these plants do not lead to emissions increases.
At the same time, a lack of viable long-term storage options could mean fossil fuel-fired technologies are needed for longer periods. Bess systems too can suffer from an inability to charge during long periods of low renewables output, which prompted Polish grid operator PSE to increase the technology's de-rating in an auction held last year.
Other countries are considering setting up capacity markets, with discussions under way in Spain, Germany and Greece. Spain's planned market, which is under consultation, will allow payments for thermal generators only for a year in advance and in particular circumstances, with only renewables, storage and demand response being eligible for long-term support.
