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 Europe’s 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
Germany’s 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. It’s 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 €24.47/MWh (the lowest was €14.98/MWh), guaranteed for 12 years through contracts-for-difference (CfDs). As such auctions continue around Europe, Michael ClauĂźner 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 – the UK, Germany, Denmark, the Netherlands and Belgium – to show that wind farms due to be built after 2020 are converging towards a range of €50-70/MWh. It wasn’t long ago that such low prices were only predicted for 2050, say Iegor Riepin, Felix MĂĽsgens (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 EC’s 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. “Climate Auctions” 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...]