The European Commission has given limited backing for gas and coal power subsidies, which will boost conventional utilities caught out by a surge in renewable power, but may undermine carbon cuts.

Renewables have depressed profits for utilities in countries with a large, growing base of wind and solar power, such as Germany.

European wind and solar power are subsidised, have no fuel costs, and get priority grid access, meaning that when the sun is shining and wind blowing wholesale power prices can fall to near zero or even go negative, destroying the margins of gas and coal-fired power plants run by conventional electricity utilities.

EU member states can now support fossil fuel generation, through so-called capacity markets, the Commission said on Wednesday updating its state aid rules.