Mott's Blog

The big plan to save coal energy in Poland - which is dying here as it is all over Europe - includes plans to allow coal plants to receive subsidies while they are not operating, just so they will be available when needed. This is a terrible plan on many levels, i.e. coal plants have slow "ramp-up" times and cannot quickly respond to peak power demands. They also are very uneconomic to run at lower than 75-80% utilization rates. U.S. studies showed even at higher prices a few years ago, that energy storage was more cost-effective than fossil-fuel peak plants. And now the EU seems poised to set a CO2 limit on plants used for reserve power that would preclude coal altogether.   "Capacity mechanisms will not be used as a backdoor subsidy of high-polluting fossil fuels; that would go against our climate objectives," EU Commissioner for Climate Action and Energy Miguel Arias Canete told Reuters .  "It is necessary to include strict environmental criteria in suc...

As Poland approaches its first auctions for support for renewable energy, I am reminded of a serious criticism of this approach which I discussed earlier when the European Commission caved into the pressure from big utilities and adopted this as the preferred method of support.  See  Mott, " The European Commission's Mismanagement of State Aid Rules for Renewable Energy, " PowerGen Europe 2015.    For there to be competition in the bids for support, which is the principal factor distinguishing the auction mechanism, that has to be a lot of losing bids. The EC suggests about 50% losing bids. Without losing bids, the auctions serve no purpose that could not be achieved by simply using the support caps directly as a feed-in tariff. Why should we worry about losing bids?* Because each losing bid represents a project that could be built in the opinion of its developer and its equity and debt funding organizations. This is renewable energy capacity that is "shovel r...