Did the Winter Package deserve such a frosty reception?

The European Commission released its latest suite of rules for the European electricity sector this week. Following an impressive number of pre-announcement leaks, the contents of the deal were largely known in advance: renewed focus on energy efficiency, new rules on capacity markets and increased cooperation across borders. However, the detail was largely held back until release day.

While not yet legally binding, and still subject to change as it passes through the European Parliament, the contents of the 1000-page Winter Package could affect the UK via the impending Great Repeal Bill, even if we are no longer a part of the union. Representing a populace of more than 700 million, it will also have wide-ranging effects on the climate.

Topping the bill is an improvement in the 2030 energy efficiency target, raised from 27% to 30% by 2030. Cutting waste is the easiest route to reduce emissions and lower bills, so EC-led ambition is good to see. However, this target was outlined back in 2014, so the move hardly comes as a surprise. The 30% target is also on the lower end of the expected 30-40% range, and seems somewhat unambitious. Back in the UK, the government is expected to release its carbon plan in the new year, detailing how it will hit its fifth carbon budget, so this figure could be worth keeping in mind.

Another point of contention in the package was new rules surrounding capacity markets, systems through which energy plant owners are paid to keep plants available year-round when they may otherwise be closed or mothballed. They are already implemented in a number of EU states, and frequently attract criticism; accused of distorting the market by libertarians, and of keeping the oldest and dirtiest kit online by green groups. Their widespread use, however, shows how effective capacity markets have been at keeping the lights on during low-carbon transitions taking place in electricity systems worldwide.

As the EC was initially opposed to capacity markets as a form of state aid, their inclusion in the winter package shows how the Commission has eased on the idea. The deal contains allowances for five years of capacity payments, with limits on emissions for plants taking part. Despite outlining a 550 g/kWh limit in the package, there isn’t sufficient detail to how much of an effect this will have. Apparently designed to prevent the construction of new coal plants, the limit will have little effect if the emissions target is averaged annually, rather than based on instantaneous emissions whenever the plant is running. Further, with new gas plants operating well below 550 g/kWh, the limit doesn’t appear to be ambitious enough to force new capacity to be as efficient as possible.

It’s not all negative, however. The EC plans to allow storage and demand-side measures to participate in the capacity market. Widely understood to be enablers for increased renewable penetration, these flexible components should increase the rate at which renewable capacity is installed across Europe. The UK government is currently consulting on removing barriers for demand-side response (DSR) and storage, which should see their use increase. Currently, they are prohibited from bidding into capacity markets on the same terms as conventional generation.