28 January 2025
Capacity markets have awarded over €50bn to fossil fuel assets since 2015 — almost triple of that allocated to clean flexibility
BERLIN, 28 January 2025 – A new report by Aurora Energy Research, commissioned by Beyond Fossil Fuels, shows that nearly €53 billion has been awarded to fossil fuel plants through European capacity markets since 2015 [1]. The funds are raised through a little-known levy on energy bills, with contracts for fossil gas plants lasting up to 17 years. The report finds that almost 60% of capacity market contracts have gone to fossil assets, while only one-fifth has supported clean flexibility solutions [2].
Belgium, France, Great Britain, Ireland, Italy and Poland currently operate capacity markets. Together, they have allocated €90 billion under the schemes [3]. In total, capacity markets have provided contracts to almost 200 gas-fired power plants, including around 30GW of new-build gas plants. Contracts for these new-build plants stretch into the 2040s, including in countries committed to decarbonising their power systems by 2035 or earlier [4].
Great Britain’s capacity market—the longest operating in Europe—has allocated the most funding overall, totalling €24.3 billion. Of this, €14 billion is allocated to gas plants. Italy has allocated €18.4 billion, with €15 billion (82%) directed to gas, and only €2.2 billion—seven times less—to clean flexibility. Poland’s €19 billion capacity market has awarded the largest shares to coal-fired generators (31%) and storage assets (22%). In Ireland, 67% of its €7.5 billion allocation is directed to gas plants, while Belgium allocated 73% of its €1.3 billion capacity market to gas plants, awarding much less support to clean alternatives.
Campaigners are calling for all capacity mechanisms to be reconfigured so they prioritise future-proof investments in clean energy solutions, including storage, demand-side response, and interconnections.
Juliet Phillips, energy campaigner at Beyond Fossil Fuels, said:
“Capacity market payments to gas plant operators present a double-blow for households. Not only do they add billions of euros directly to energy bills to subsidise fossil plants, at the expense of clean flexibility options like energy storage – they also keep countries locked into volatile fossil fuel markets for longer. Our reliance on fossil gas was the root cause of the energy crisis. We call for governments to end all fossil fuel subsidies and rapidly scale-up investments in renewables, grids and clean flexibility; which will stabilise energy bills and protect the climate.”
Nicolas Leicht, Advisory Project Leader at Aurora Energy Research, commented on the findings of the report:
“Capacity instruments have become essential for ensuring security of supply in power systems increasingly dominated by renewables. However, achieving net-zero targets may require adjustments—either by evolving capacity mechanisms themselves, or by implementing complementary policies that establish a clear pathway for decarbonising power generation.”
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- Capacity markets compensate energy companies for providing capacity to meet demand, and are funded via energy bills. The report examines contracts made under six existing schemes in Europe. Figures reported were calculated using assumptions and estimations based on available public data, the details of which can be found in the methodology section of the report: https://auroraer.com/wp-content/uploads/2025/01/Capacity-Remuneration-Mechanisms-Report-Aurora_BFF_January-25.pdf
- Clean flexibility assets include interconnectors, demand side response and storage.
- Capacity markets have awarded €43.51 billion to gas plants, €7.41 billion to coal, and just €2.17 billion to demand-side response, €4.4 billion to interconnectors and €11.7 billion to storage.
- Beyond Fossil Fuels’ Government 2035 Commitment Tracker: https://beyondfossilfuels.org/government-2035-commitment-tracker/
- Aurora has provided Beyond Fossil Fuels with a comprehensive database containing information about gas plants in receipt of capacity market payments. Copies of the database are available upon request.
Contacts:
Juliet Phillips, Energy Campaigner, Beyond Fossil Fuels
[email protected], +44 7443 503328
About:
Beyond Fossil Fuels is a collective civil society campaign committed to ensuring all of Europe’s electricity is generated from fossil-free, renewable energy by 2035. It expands and builds upon the Europe Beyond Coal campaign, and its goal of a coal-free Europe in power and heat by 2030 at the latest. www.beyondfossilfuels.org