EU countries fail to agree energy reforms after coal subsidy clash

Governments also not agree on state aid for power plants

LUXEMBOURG (Reuters) – European Union countries failed on Monday to agree on planned new rules for the bloc's power market, having clashed over a proposal to extend subsidies for coal plants under the reform, and a push to expand state aid for other power plants.

EU energy ministers meeting in Luxembourg ended talks without a joint stance on the reforms that seek to avoid a repeat of last year's energy crisis, when record-high gas prices left consumers with soaring energy bills.

The talks had been complicated by a late proposal by Sweden, which holds the EU's rotating presidency, to allow countries to prolong capacity mechanism subsidies for coal power plants that pay generators to keep capacity on standby to avoid blackouts.

EU countries' ambassadors will take up the negotiations, aiming for a deal this month.

Asked about the coal proposal, Swedish Energy Minister Ebba Busch said ensuring Poland, which borders Ukraine, had stable power generation could help it support Ukraine with back-up power.

Poland, which gets around 70 per cent of its power from coal, could prolong its support scheme for coal plants, potentially until 2028, under the proposal.

Countries including Austria, Belgium, Germany and Luxembourg had objected, saying the move would undermine Europe's goals to fight climate change.

The draft proposal, seen by Reuters, would allow existing capacity mechanisms to temporarily waive a CO2 emissions limit - enabling coal plants to participate - if they fail to attract enough lower-carbon generators, and if the European Commission approved the exemption.

"For some of us, security means capacity markets," Polish Climate Minister Anna Moskwa said earlier on Monday.

Coal is the most CO2-emitting fossil fuel. Scientists say its use must plummet this decade if the world is to avoid the most severe impacts of climate change.

STATE AID

Ministers also struggled to agree rules governing state support for renewable and nuclear power plants, with Germany and France at odds over the issue.

Germany, Austria and the Netherlands had said letting countries offer fixed-price power contracts with the state to existing power plants, as well as new ones, could distort the EU's single market.

"This could lead to market distortions as large parts of the markets could become inflexible, and also to a distortion of a level playing field concerning the prices in Europe," German Economy and Climate Minister Robert Habeck said in the meeting.

EU diplomats said the concerns centred around the potential use of these subsidies for French nuclear plants.

French Energy Minister Agnes Pannier-Runacher opposed the call to restrict the use of such contracts, which she said "endangers the objective of security of supply and of protecting consumers".

The proposed EU power market reform aims to make power prices more stable. Once they agree a common position, countries must negotiate the final law with the EU Parliament.

The latest proposal would also let countries introduce national schemes, until mid-2024, to recoup windfall revenues from some power plants if power prices spike - a move backed by countries including Greece and Spain.