PRESS RELEASE
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 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.
With Greece considering a similar market, campaigners are urging policymakers to leapfrog costly gas plants and focus on clean flexibility solutions that can shield households and industries from future gas price shocks.
Across Europe, capacity markets have awarded a total €90 billion in contracts since 2015, to be paid via energy bills. Countries where capacity markets have provided the largest total contracts include Great Britain (€24.3 billion), France (€19 billion), Poland (€19 billion), and Italy (€18.4 billion). In total, capacity markets have locked in at least 30 GW of new gas plant capacity with long-term contracts.
The more reliant a country is on gas, the more exposed it is to volatility in international fossil fuel markets [2]. Greece knows this all too well, having spent €10.7 billion in just 16 months supporting households and businesses through Europe’s gas crisis [3].
Nikos Mantzaris, Senior Policy Analyst at The Green Tank, said:
“If a detailed Resource Adequacy Assessment proves that a capacity market is indeed necessary to guarantee security of supply, Greece should consider the strategic reserve option first. If that is still not adequate and a capacity market needs to be designed, priority should be given to supporting clean flexibility options such as storage and demand side response over gas. This will allow Greece to reduce the risks associated with gas price spikes and set the country on the correct and most economic path to achieving a renewables-based power system by 2035.”
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; 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.”
Contacts:
Juliet Phillips, Energy Campaigner, Beyond Fossil Fuels
juliet.phillips@bff.earth, +44 7443 503328
Notes:
- 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.
- See University College London report: https://www.ucl.ac.uk/bartlett/sustainable/sites/bartlett_sustainable/files/the_role_of_natural_gas_in_electricity_prices_in_europe_updated_may_2023.pdf.
- Green Tank report on the cost of the energy crisis in Greece: https://thegreentank.gr/en/2023/06/08/addressing-the-energy-crisis-performance-funds/.
- Aurora has also 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.