At the end of April, the winners were announced of the first pilot auction to allocate subsidies for EU hydrogen production via the European Hydrogen Bank. The winning bids were between âŹ0.37 and âŹ0.48 per kg, much lower than the âŹ4 â âŹ6 per kg estimated âgreen premiumâ cost gap between renewable hydrogen and fossil hydrogen in Europe. The low bids mean companies applied for fewer subsidies than needed to bridge that âgreen premiumâ gap because … [Read more...]
Low Emission Hydrogen: creating markets to get buyers to make firm commitments
Low emission hydrogen is expected to play an important role in global decarbonisation, though costs today are very high and must come down. Economies of scale will help, but production is yet to pick up pace as there are inadequate âdemand signalsâ which result in financial risks for project developers. Kapil Narula and Luciano Caratori of Climate Champions Team, Laurent Antoni at IPHE, and Nigel Topping (former UN Climate Change High-Level … [Read more...]
EU ETS2 for Buildings, Road Transport in 2027: why we need auctions to start early
The EU has established a second emissions trading system (ETS) to put a carbon price on buildings and road transport, the âEU ETS2â. The ETS2 starts in 2027, but monitoring and reporting of ETS2 emissions will begin in 2025. One issue is that an ETS means prices for long-term fuel supply contracts will be affected, so a crucial question for firms is how to hedge their potential exposure, says Ingo Ramming at BBVA writing for the Florence School … [Read more...]
Europeâs cross-border Interconnectors: how JAO auctions optimise energy flows, prices
Interconnectors allow for cross-border flows of energy between two markets that would otherwise not be connected. Through an economic convergence between supply and demand, the cheapest marginal producer located anywhere in these two markets should be able to set market prices. As Jean-Baptiste Vaujour at the Emlyon Business School explains, the central question is to find an optimal allocation of the scarce interconnection capacity between the … [Read more...]
Global inflation: high borrowing costs threaten the continued growth in Renewables. What must be done?
Over the last decade, investors and governments got used to two supportive trends: relatively cheap capital from low interest rates, and steadily falling costs. However, this changed as the world emerged from the Covid pandemic and into the global energy crisis. In a new era of high interest rates, the impressive growth in renewables deployment is under threat, explain Tim Gould, David Fischer, Paolo Frankl and Heymi Bahar at the IEA. Renewables … [Read more...]
How to manage price risk as the EU shifts from Russian Gas to Renewables
Europe is phasing out Russian gas and replacing it with more renewables. That means there will be greater demand variability and a resulting impact on European spot gas prices. The problem is that long-term contracting, the traditional way for buyers to mitigate spot price risk, is incompatible with Europeâs climate objectives of reducing long term consumption of gas. Kong Chyong at the Center on Global Energy Policy proposes alternative policy … [Read more...]
Germany: will the end of feed-in tariffs mean the end of citizens-as-energy-producers
Germanyâs feed-in tariffs ran for 20 years. The guaranteed electricity price and connection to the grid incentivised ordinary citizens and communities to invest in smaller scale solar, biomass and wind generation for their homes and local areas. But that guaranteed price is now too expensive, and so the tariffs are ending and lowest-bid auctions are taking over. Itâs the bigger players who are winning those auctions, and some of the existing … [Read more...]
Do government renewable energy auctions squeeze the PPA market?
Spanish government renewable energy auctions in January produced record-breaking low strike prices for both wind and solar. For solar the average price was âŹ24.47/MWh (the lowest was âŹ14.98/MWh), guaranteed for 12 years through contracts-for-difference (CfDs). As such auctions continue around Europe, Michael ClauĂner at Energy Brainpool asks what impact these prices will have on future power prices in general and on solar power purchase agreement … [Read more...]
Europe could have subsidy-free Offshore Wind by 2023
A study has analysed offshore wind projects in 5 countries â the UK, Germany, Denmark, the Netherlands and Belgium â to show that wind farms due to be built after 2020 are converging towards a range of âŹ50-70/MWh. It wasnât long ago that such low prices were only predicted for 2050, say Iegor Riepin, Felix MĂźsgens (Brandenburg University of Technology), Malte Jansen and Iain Staffell (Imperial College London), writing for Carbon Brief. To make … [Read more...]
Tech-Neutral Auctions for Renewable Energy: are poorly defined rules creating loopholes?
The ECâs Environmental and Energy State Aid Guidelines 2014-2020 (EEAG) require Member States to implement technology-neutral auctions as part of their renewable energy support schemes. However, the reality looks quite different, write Bastian Lotz and Silvana Tiedemann from Navigant (a Guidehouse company), Lars Jerrentrup of Aurora Energy Research, and Lion Hirth from Neon. Most Member States continue to use technology-specific auctions, using … [Read more...]
2019-2024: competitive auctions will launch over 2/3rds of utility-scale renewables, says IEA
Government support for new utility-scale capacity is being replaced with competitive auctions, the surest sign that the commercial appetite for renewables - particularly solar PV and onshore wind - is growing strong. This article by the IEA pulls out the essential numbers from their annual Renewables 2019 report (their 5-year market analysis and forecast for renewable energy and technologies in the electricity, heat and transport sectors). The … [Read more...]
Climate Auctions can reduce emissions and accelerate regulatory, financial and infrastructure goals
Auctions for delivering an amount of power at a defined price are already well established for renewables. âClimate Auctionsâ do the same with carbon emissions: a carbon price is guaranteed to the winning bidder, but only paid on delivery of the emissions cut. Tyeler Matsuo and Julia Meisel at Rocky Mountain Institute say this is proving particularly useful in emerging and developing countries where progress in building up their climate laws is … [Read more...]
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