As part of its Clean Energy Package, the European Commission has considered introducing a so-called “550g rule”. This would exclude plant capacities that emit more than 550g of CO2 per kilowatt hour from participating in capacity remuneration mechanisms (CRMs). Frontier has been commissioned by the German energy supplier RWE to review the impact of this rule.
CRMs enable payments to be made to electricity generators to be ready to supply electricity when demand is particularly high. The 550g rule would exclude all coal and oil plants, as well as many gas-fired plants, from participating in CRMs.
Frontier’s analysis concludes that:
Overall, the study argues that using an instrument like a CRM, which is designed to promote security of energy supply, to pursue environmental policy objectives is inefficient. Instead, it suggests that climate policy objectives should be pursued through dedicated instruments, in particular the EU ETS.
Frontier regularly advises public and private sector clients on issues relating to energy policy and market design in Europe.
For more information, please contact Miriam Rau on firstname.lastname@example.org, or call +44 (0)20 7031 7000.