28 October 2025

Public money, private interests: EU governments usher through fossil gas subsidies worth billions

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Consumers set to pay the price as fossil gas firms cash in on capacity schemes

A wave of expensive energy support mechanisms is sweeping across Europe, with EU institutions failing to properly scrutinise them. Ahead of the winter season that pushes many households and industries to the limits, Germany plans to spend up to €32 billion on 20GW of new gas plants [1]. Greece is pushing ahead with a new subsidy scheme to support gas-fired power [2]. Poland has rewritten auction rules to effectively exclude clean battery projects and support a new fleet of costly gas plants [3]. Meanwhile, the EU watchdogs meant to prevent this kind of market distortion appear to be looking the other way. This risks creating an unwarranted wealth transfer from households and industrial consumers, into the hands of Europe’s energy giants. 

These subsidy schemes – known as capacity markets [4] –  were originally conceived as temporary support measures [5] to ensure energy security, by paying energy companies to keep power plants on standby to meet peak demand. But despite clear EU rules stating they must be underpinned by robust evidence of their necessity; and that they should be designed in a way which is technology neutral, many governments are bypassing key steps intended to justify these mechanisms and ensure fair competition. 

The result? A growing risk is that billions of euros in energy subsidies are being handed to fossil fuel companies, including EP Group, ENEL and RWE [6], paid for through levies on household and industrial energy bills, while proven clean and flexible technologies are pushed out of the market.

 

A new fossil gas boom at Europe’s expense

Germany’s new conservative-led government is planning 20GW of gas plants backed by tenders and a new national capacity market. Prioritising one technology at such scale, without a clear, competitive assessment of alternatives, flies in the face of EU requirements for technology neutrality and fair market competition. The estimated price tag? Up to €32.4 billion over 15 years [7], a direct burden on German energy users.

Independent studies [8] have found that Germany’s future supply shortfalls are far smaller – closer to 5GW – and that backing gas over cleaner alternatives like batteries could lead to billions in stranded assets and inflated bills. The measure has been criticised across the political spectrum: including the conservative KlimaUnion group warning they will “make gas the market’s price setter” and drive up electricity costs [9].

Meanwhile, Greece is preparing to launch its own capacity market, without publishing any evidence it actually needs more gas power, nor consulting on plans. Experts argue the scheme is less about domestic energy needs, and more about supporting Greece’s ambition to become a gas-exporting hub, with local consumers footing the bill [10]. This raises questions regarding whether the scheme is intended as an ‘energy security’ measure in the true sense.

In Poland, after battery storage projects outcompeted fossil gas in recent auctions, the government decided to run an additional auction this summer. In this auction, it changed the rules to exclude storage, and subsequently handed 17-year contracts to five gas plants that had previously failed to qualify. The move triggered outcry from regulators and industry alike [11], citing lack of transparency and blatant market distortion.

Concerns about transparency and accountability are further compounded by the fact that the same utility companies lobbying for new subsidies in the name of energy security are also reporting rising profits from existing capacity market payments. Poland’s largest energy utility, PGE, reported a first-quarter recurring core profit of 4.33 billion zlotys (€1.16 billion) [12], with regulatory revenue from capacity mechanisms cited as a key driver. This raises serious questions about potential conflicts of interest, and whether calls for additional public support are truly driven by system needs, or by the financial interests of incumbent fossil operators.

 

EU oversight is missing in action

These schemes are subject to EU rules and Commission oversight, but in all three countries, governments appear to be ignoring requirements to demonstrate the need for these markets, despite the enormous costs they could add to household and industrial energy bills.

At the EU level, the European Commission is meant to act as a gatekeeper, ensuring that capacity markets are technology-neutral, based on independent assessments to demonstrate their necessity. But recent developments show the Commission is increasingly rubber-stamping approvals or turning a blind eye, even when serious concerns are raised.

Even more alarmingly, the EU’s own internal renewable energy targets may now be at risk. According to recent reports [13], a French-German backroom deal may see France drop its opposition to Germany’s gas-based capacity market, in return for watering down EU renewables targets.

 

Clean, flexible alternatives are ready – but not getting a fair chance

Across Europe, battery storage, demand-side flexibility, and grid interconnectors are proving to be already cheaper, cleaner, and more scalable than new fossil gas plants [14]. These solutions are not only technically ready: they are already competing successfully in markets when given a level playing field. Yet, too often they are being sidelined by policy choices that favour large fossil fuel operators. Policy decisions being made in Germany and Poland clearly risk undermining the market for these solutions, while exposing consumers to the high costs and volatility of fossil gas.

Europe risks locking itself into decades of fossil gas dependence, while households and businesses are left to pick up the tab.

 

Key facts

  • ~€90 billion: Europe’s capacity market contracts to date, of which over €50 billion have been allocated to fossil fuel power plants [15].
  • €22.2 to €32.4 billion: Projected cost of Germany’s 20GW fossil gas expansion over 15 years [7].
  • 61% to 12%: Reduction in battery storage’s availability rating under Poland’s revised auction rules, effectively pushing clean storage out of the market [16].
  • Greece’s gas gap questioned: Current domestic demand is well below existing gas capacity of 6 GW, casting doubt on claims that an additional 5.5 GW is needed [10]. 
  • Greece’s export ambitions over domestic needs: Greece gas-fired power growth driven more by political aspirations to become an energy exporter than by energy security concerns [17]. 

 

What needs to happen

The European Commission and other EU watchdog institutions must:

  • Enforce the rules: no capacity market should be approved without independent, public analysis proving need.
  • Ensure fair competition: auctions must not sideline clean, flexible solutions like storage and demand response.
  • Protect consumers: fossil fuel subsidies should not be passed through to household and industrial bills.

This moment marks a critical test for the EU’s role in protecting the interests of European families and industries, while consolidating its energy policy credibility. If fossil gas companies are allowed to dominate future energy planning through poorly designed and opaque capacity markets, consumers will pay the price – locking in high energy prices, and undermining industrial competitiveness.

 

END

 

Contacts:

Juliet Phillips, Energy Campaigner, Beyond Fossil Fuels, [email protected], +44 7443 503328

Julia Pazos, Communications Manager, Beyond Fossil Fuels, [email protected], +13109949692

 

Notes:

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