Hitting the current national 2030 quotas for solar and wind energy could reduce the volatility of electricity markets by an average of 20 percent across 29 European countries, according to a new study from the University of Cambridge.
The intensity of spikes in power prices is predicted to fall in every country by the end of the decade if commitments to green energy are met, as natural gas dependency is cut.
The UK and Ireland would be the biggest beneficiaries, with 44 percent and 43 percent reductions in the severity of electricity price spikes by 2030, compared with last year.
Germany could experience a 31 percent decline in electricity price volatility, with the Netherlands and Belgium seeing price spikes ease by 38 percent and 33 percent respectively.
The simulations conducted for the new study show that scaling up renewable energy minimises the market impact of fluctuations in natural gas prices – increasing stability even when considering the reliance
of renewable technologies on weather.
Some EU leaders and energy ministers have called for renewables targets on grounds of energy security as well as decarbonisation, particularly since Putin’s war on Ukraine stemmed the flow of Russian gas.
The study, published in the journal Nature Energy, calculates in detail how such aims would affect the volatility of wholesale electricity prices in energy markets across Europe.
“The volatility of energy prices is a major cause of damage to national economies,” said Laura Diaz Anadon, the University of Cambridge’s Professor of Climate Change Policy.
“Consumers are still reeling from sharp increases in electricity prices brought about by natural gas shortages following Russia’s invasion of Ukraine,” said Anadon. “We show that hitting renewables targets reduces the likelihood of such price spikes in the future.”
Daniel Navia, a researcher with the University’s Centre for Environment, Energy and Natural Resource Governance (CEENRG), said: “Meeting renewable energy targets is not only good for carbon neutrality, but we can
see it is a boost to economic resilience.
“We had probably underestimated how costly energy price shocks are to our societies, and the last crisis has been a stark reminder.”
The Cambridge researchers used the University’s high-performance computing facilities to model a wide range of factors – from fluctuations in weather patterns and energy demands to fuel capacity – to map the current and future grids of all 27 EU nations plus the UK and Switzerland.
They assessed electricity markets in 2030 based on the commitments to renewables as stated in each nation’s national energy and climate plan.
“The UK in particular is projected to see major benefits to its energy market stability from renewables,” said Anadon.
“The UK has struggled with its exposure to gas prices due to a lack of energy storage and limited connections to the European grid. This has led to more hours where electricity prices are set by natural gas.”
The research also suggests that
wholesale prices of electricity could fall by over a quarter on average across all countries in the study by decade’s end if they stick to current national renewables targets.
Again, populations in the UK and Ireland stand to gain significantly, with electricity prices predicted to fall by around 45 percent by 2030, compared with the current situation.
Several of the Nordic nations could see over 60 percent reductions in electricity costs by 2030, while in Germany the price is predicted to fall by 34 percent, with Belgium seeing a similar drop of 31 percent. The study suggests the Netherlands could see the price of electricity fall by 41 percent.
While the study’s authors caution that trends in electricity prices depend on factors that are “impossible to predict”, they say their results are in line with recent outputs by institutions such as the International Energy Agency.
In fact, Navia and Anadon say their modelling may even underestimate the potential for electricity price
stability across Europe, as the projections were calculated using data from 1990-2021 – before the energy crisis created by Russia’s attack on Ukraine.
“It makes sense to think about renewables as a security investment, and if we lose the momentum towards green energy, we are clearly harming the climate, but we also exposing ourselves to unknowable risks down the line,” said Anadon.
The new study also charts the effects on electricity prices if countries overshoot on renewables. If Europe exceeds its renewable energy goals by 30 percent, electricity prices could become 50 percent less sensitive to natural gas, compared to just meeting renewables targets.
However, the study suggests there are tipping points where renewables cause the price of power to fall so far that it stops providing sufficient return on investment, and the green energy industries may stall.
Added Navia: “If we are to fully utilise solar and wind as a security tool, Europe might have to rethink how its energy markets are designed, and what incentives it can offer the private sector to maintain the societal insurance value it gets from renewable energy.”