A perfect storm of factors
Higher power prices will push up customer bills
Low levels of wind and solar
EU power market redesign
What about oil?
What can be done?
- Build more renewables – at a rate fast enough to keep up with the closure of the carbon-emitting generation. A notable barrier to growth has been planning consent as local communities while supportive of renewables in theory remain resistant to obstruction of views – behaviour described as “Nimby” or Not In My Backyard.
- Increase storage capacity for both gas and pumped hydro, investing in interconnections and grid balancing.
- Consider a new pricing mechanism for electricity. Currently, the electricity price is determined by the price of gas in Europe. This made sense in the past, when gas or coal accounted for the vast majority of electricity generation, because it was representative of the cost of the system. But as renewables grow it makes more sense to have 80% of renewable generation costing €30-€40/mwh, and 20% of gas generation costing a highly variable €30-€80/mwh, but with the latter determining the price for all. In this scenario, the tail should stop wagging the dog.