Capacity payments: The final ingredient to supercharge coal

This briefing argues that without a carbon intensity limit of 550gCO2/kWh for capacity payments, Europe's coal plants could be 'supercharged,' extending their operational lives and crowding out cleaner energy alternatives. The document outlines existing EU policy gaps that favor coal and details how specific capacity market designs risk subsidizing fossil fuels over modern technologies like batteries and demand-side response.

• The proposed "550" legislation, which sets a 550gCO2/kWh limit for capacity payments, is intended to prevent high carbon intensity power plants from receiving these payments. This is particularly critical for Europe's 256 operational coal plants, all of which exceed this carbon intensity threshold.
• Several EU policy gaps currently provide advantages to coal, including the lack of an explicit EU policy to prevent fossil fuel subsidies despite G7 pledges, and the fact that the European Investment Bank (EIB) has provided funds to four large Polish coal companies (PGE, ENEA, Energa, and Tauron) that could potentially cross-subsidize coal assets.
• Capacity market designs risk favoring coal over flexible technologies like batteries, demand-side response (DSR), and small peaking plants. Risks include minimum availability durations that block batteries, the use of the same auction for new and existing capacity, and multi-year contracts (such as 3-year contracts in the UK and Poland) that encourage investment in old coal plants to meet air pollution limits.
• Clean, modern capacity is presented as a cheaper alternative to extending coal plants. In a February 2018 UK auction, two coal plants were replaced by interconnectors, small peaking gas plants (328MW), and batteries (364MW of projects) at a clearing price of approximately €9/KW.

APA

Jones, D. (2018). Capacity payments: The final ingredient to supercharge coal. Ember. https://ember-energy.org/app/uploads/2020/03/Capacity-Payments-The-final-ingredient-to-supercharge-coal-2018.pdf

Chicago

Jones, Dave. Capacity payments: The final ingredient to supercharge coal. Ember, 2018. https://ember-energy.org/app/uploads/2020/03/Capacity-Payments-The-final-ingredient-to-supercharge-coal-2018.pdf.

Wikipedia

{{cite report |last1=Jones |first1=Dave |title=Capacity payments: The final ingredient to supercharge coal |publisher=Ember |date=19 February 2018 |url=https://ember-energy.org/app/uploads/2020/03/Capacity-Payments-The-final-ingredient-to-supercharge-coal-2018.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{jones2018capacity, author = {Jones, Dave}, title = {{Capacity payments: The final ingredient to supercharge coal}}, institution = {Ember}, year = {2018}, month = feb, url = {https://ember-energy.org/app/uploads/2020/03/Capacity-Payments-The-final-ingredient-to-supercharge-coal-2018.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }