Some people in Brussels are talking about a “deal breaker”. So from an idea that you can not agree to under any circumstances. Poland wants subsidies for coal-fired power plants to be allowed throughout Europe for years to come – and is thus fighting for the dirtiest of all energies. This is the only way, say Warsaw, to ensure the continent’s power supply.
Almost all other countries reject the demand, including Germany. The dispute over this is now blocking a project that affects millions of people in the EU – and even beyond.
It is about a reform of the European electricity market. EU politicians and diplomats are trying to find an answer to a highly sensitive question: how to avoid a renewed spike in energy prices in the event of a crisis, as they did after Russia’s attack on Ukraine last year?
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After all, the Industry Committee of the European Parliament decided on a position on the subject on Wednesday. Now the 27 European governments have to come to an agreement on this question.
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Last year Moscow stopped gas supplies to Europe in retaliation for Western sanctions. As a result, energy temporarily became significantly more expensive. Parliament now wants to give consumers the right to fixed-price contracts to protect them from price fluctuations.
In addition, the expansion of renewable energies is to be promoted throughout the EU. Subsidies for wind turbines and solar parks are planned. Rather not for coal-fired power plants. “We liberated the electricity market and ended the subsidy paradise for nuclear power and coal”, says Michael Bloss, MEP for the Greens in the European Parliament. “We have made sure that they have to face fair competition and no longer benefit from special rules.”
In the future, the energy transition is to be boosted with contracts for difference – the industry speaks of “contracts for difference”. The EU countries, so the idea goes, guarantee energy suppliers a minimum price for electricity if they make investments in renewable sources. If the market price is lower, the state compensates for the difference. If a company earns more than stipulated in the contract, consumers should benefit from it.
Poland wants to extend coal subsidies by three years
Poland also wants to protect its electricity customers, but with different means. The country does not rely primarily on state aid for wind and solar energy – but for coal. Specifically: Warsaw wants financial support for reserve coal-fired power plants, i.e. for plants that are on standby and are always started up when wind and sun are not supplying enough energy.
Current EU rules stipulate that Poland may subsidize coal-fired power plants until 2025. The government in Warsaw now wants to extend this regulation by three years. The topic is important to her, because Poland generates almost 80 percent of its electricity with fossil fuels.
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Only in Cyprus and Malta is the proportion even higher. Poland argues that subsidies for back-up coal-fired power plants would also help millions of people in Ukraine – after all, more electricity could then be sent to the neighbor when needed.
The EU Parliament did not clearly reject the Polish demand. The still unpublished resolution of the Industry Committee states: The energy crisis has shown that there is a need for “flexible reserve generation” that will increase with an increasing share of renewable energies in the electricity mix. This can be read as a nod to Poland to pave the way for a compromise with the country.
Germany is one of the loudest critics of the idea from Warsaw. Promote coal power with state money? “In my view, that is wrong,” said Economics Minister Robert Habeck recently. That cannot be reconciled with the climate goals of the EU.
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And Austria’s Energy Minister Leonore Gewessler said the plan would not only open a back door, but “a barn door”. She criticized: “We need the electricity market for the future and not one for the past.”
Last month, the EU states significantly raised the target for the expansion of green energies: from the previous 32 percent to 45 percent in 2030. This agreement was not easy either. Because there was a dispute about the question of what counts as green. France wants to include nuclear power – Germany and many other European countries do not.
A difficult dilemma to solve
Paris is committed to ensuring that nuclear energy also falls under the differential agreements and can be subsidized by the state. MEPs on Wednesday did not rule out that either, a small triumph for France. However, it remains to be seen whether the member states will ultimately agree.
At least last month, the Commission made a concession and formulated a non-binding declaration: It was recognized that not only wind and sun, but also “other fossil-free energy sources” could help to implement the so-called Green Deal, i.e. Europe by the Turning it into the world‘s first carbon-neutral continent by mid-century.
There is approval from the economy for the resolution of the parliament. “The reform of the electricity market design is an important milestone on the way to climate neutrality,” says Sebastian Bolay, energy expert at the German Chamber of Industry and Commerce. “Companies that invest in renewable energies get more planning security.”
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However, Bolay is in favor of the contracts for difference being a voluntary instrument – and not mandatory, as some have called for. “A mandatory introduction would entail the risk that systems would no longer react to market signals and thus the electricity costs for the economy would increase,” says Bolay.
It will probably take a while before an agreement is reached between Parliament and the EU countries. So far it is not foreseeable that Poland will move on the topic of coal. The country feels dependent on the energy source – but the German Greens will hardly be able to agree to coal subsidies. It is a dilemma that will be difficult to resolve.
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