Our latest report, commissioned by Beyond Fossil Fuels, reviews Europe’s capacity markets and which types of technologies have been awarded most contracts.
Other key findings include:
- The increasing share of variable renewable power requires more system flexibility to ensure supply security. This can be achieved by further integrating the European power system, leveraging demand-side response, and accelerating the roll-out of batteries, long-duration energy storage, and energy efficiency measures.
- Some European countries use capacity markets (CMs) to ensure sufficient levels of flexible and dispatchable capacity. These markets have implications for Europe’s climate targets.
- So far, thermal technologies like gas, coal, and—mostly in France—nuclear plants have received more than two-thirds of the estimated 90bn € in capacity payments allocated, with gas-fired assets accounting for about half.
- 30GW of new gas-fired capacity has been contracted in CMs over the last decade. Many of these assets’ technical lifetimes extend beyond targets for climate neutrality. To reach them, these assets need to be decarbonised, which may involve early decommissioning. While some countries are considering retrofitting plants with CCS or a fuel switch to hydrogen, this would be costly, require major infrastructure changes, and exhibit other uncertainties.
- To meet climate targets, capacity markets should be designed to incentivise emission-free options like batteries and enforce emission regulations for thermal assets, even if their primary role is to ensure security of supply.
For a comprehensive overview of our findings, you can download the full report now.
