The collapse in electricity prices puts the development of renewables at risk. Here’s why and how to avoid it
Electricity prices on major EU wholesale markets have been negative for most hours recorded this year. A situation favored by the boom in renewable energy production and the time misalignment between supply and demand for solar energy. A trend that risks slowing down the development of renewables. The reasons and solutions.
ELECTRICITY PRICES COLUMN
The number of tradable hours in which electricity prices have been zero or negative has seen a boom this year in major wholesale energy markets: Germany, France, the Netherlands, Spain, Finland and southern Sweden, according to LSEG. A trend that has begun to slow investment in additional storage capacity. Investments that would allow energy producers to avoid reducing electricity production or paying more, according to a Reuters analysis.
For example, Spanish electricity prices plummeted in February, due to record wind and solar energy production in Spain. A trend that also had effects in France, where prices dropped by a third.
However, Spain’s Renewable Energy Association confirms that wind and solar producers have started to slow down battery investments as negative prices have become more common in the wholesale energy market.
“It’s not something we’re worried about at the moment. What worries us is that it will be repeated or may be repeated over time. And yes, in some ways, investment is slowing down. They have not stopped, but they are slowing down,” José María González Moya, director general of the renewable lobby APPA Renovables, told Reuters.
RENEWABLES AT RISK? THE SOLUTIONS
Volatility in wholesale electricity prices creates uncertainty for renewable companies about the impact on future revenues and investments. The possible solution to this situation in which the increase in solar production capacity weighs on energy producers is to invest more in storage systems, according to analysts consulted by OilPrice-
“Volatility in wholesale electricity prices creates uncertainty for renewable companies over the impact on revenues and future investments, underscoring the need for storage and grid expansion,” the International Energy Agency said ( IEA) in its World Energy Investment 2024.
