EU Faces Setbacks in Expanding Renewable Energy... Controversy Over 'Coal Subsidies'

The European Union (EU) has embarked on expanding renewable energy to prevent the recurrence of the energy crisis caused by the Russia-Ukraine war, but it has encountered difficulties in reforming the electricity market due to controversies over coal subsidies.

Kadri Simson, EU Commissioner for Energy, announced at a press conference after the Energy Council meeting held in Luxembourg on the afternoon of the 19th (local time) that they failed to reach a provisional agreement on the electricity market reform plan.

[Image source=Yonhap News]

The draft electricity market reform plan centers on measures to restructure the current energy pricing system, which is dominated by short-term contracts and has high price volatility, where the overall electricity price, including renewable energy generation prices, rises when the price of fossil fuel natural gas surges.

The agreement also included measures to accelerate the transition of power resources from fossil fuels to renewable energy by providing electricity generated from five types of renewable and non-fossil fuels, such as wind and solar power, at fixed prices.

However, confusion arose over the provisional agreement when Sweden, the current rotating presidency of the EU, recently proposed allowing the so-called 'extension of coal power plant subsidies.' Sweden is demanding continued subsidies for coal power plants that maintain 'generation reserve capacity' to prevent blackouts. According to EU regulations, the rotating presidency can exercise the right to speak on key issues, exerting considerable influence in determining the direction of discussions.

Countries such as Poland, which produces 70% of its electricity from coal power, and some countries that have relied on Russian natural gas, are reportedly in favor of Sweden's proposal.

On the other hand, Germany, Belgium, Luxembourg, and others opposed it, arguing that it conflicts with the EU's carbon neutrality goals. These countries consider that continuing subsidies for coal fuel use is tantamount to exacerbating global warming.

The EU aims to complete the legislative process before the EU elections scheduled for June next year, but it is expected to take considerable time to finalize the procedure. For the electricity market reform plan to be implemented, the provisional agreement of the Council composed of EU member states, which was stalled on this day, must first be resolved.

Eva Busch, Sweden's Minister for Energy, who chaired the meeting, said she would continue efforts to reach a provisional agreement among EU member states.