New Brattle Report Outlines Strategies for Aligning Europe’s Capacity Mechanisms with Clean Energy Transition Goals
Commissioned by Clean Air Task Force (CATF)
A new report from The Brattle Group, commissioned by Clean Air Task Force (CATF), identifies practical strategies for European policymakers to update capacity mechanisms and clean energy procurements to create mutually supportive incentives for meeting both reliability needs and long-term decarbonization goals. With Europe’s energy mix shifting rapidly toward variable renewables, the report shows how enhanced and coordinated approaches to security of supply and clean energy procurement can reduce costs, enable cross-border trade, and accelerate the transition to carbon-free energy.
The report, Clean Security of Supply in Europe: Models for Market-Aligned Contracting and Procurement, examines different approaches to reliability planning and clean energy procurement, ranging from enhanced energy-only markets and capacity mechanisms to multi-product markets and centralized policy-driven planning. The authors note that existing approaches in Europe have been disconnected and uncoordinated at the EU and regional levels, which risks resulting in overlapping support schemes and higher costs. The report provides options that European countries can adapt to their specific national contexts while maintaining competitive investment incentives and operational efficiency.
Key takeaways from the report include:
- Current approaches create costly overlaps: Security of supply mechanisms in Europe have tended to support fossil generation, while uncoordinated clean energy procurement schemes often fail to incorporate reliability needs. This disconnect results in higher overall costs and risks, locking in fossil fuel dependency.
- Co-optimizing clean and reliability mechanisms reduces costs: The report highlights successful international examples, including Mexico’s long-term auctions, which (while short-lived) were successful in achieving record-low clean energy prices by co-optimizing procurement of energy, capacity, and clean attributes in a single competitive process.
- Updated capacity mechanism designs can support the clean energy transition: Currently, a third of capacity support payments go to clean technologies, while gas leads in long-term contracts. Strategic design choices such as technology-neutral derating factors that accurately reflect each resource’s contribution to reliability, and regionalized product definitions that enable cross-border trade, can help capacity mechanisms attract clean, flexible resources while maintaining system adequacy. Firm clean capacity can be more directly incentivized through a schedule of clean capacity requirements.
The full report – with detailed case studies, design principles, and recommendations for integrating clean energy goals with security of supply planning in European electricity markets– can be found on the CATF website and below.
CATF and Brattle will also present the report’s findings at a webinar on Thursday, March 5, at 3:00 p.m. (CET) – register here to join the discussion on transatlantic learnings and policy pathways for Europe.
