Written by Roberta Harrington, London
© IntelliNewsOslo-based Rystad Energy says Europe's renewable energy supply chain is threatened by rising energy prices. The research firm said 25% of Europe's solar and battery production capacity is at risk.
Electricity prices in Europe rose further after Moscow's intervention in Ukraine restricted the import of Russian natural gas.
In a study published in early October, Rystad said record electricity prices in Europe are hurting the continent's efforts to build a reliable low-carbon supply chain and meet its decarbonisation goals. According to him, battery and solar energy manufacturers mainly deal with installation costs.
Because producers in other regions, such as Asia, have lower electricity access tariffs, European producers are relatively more competitive, Rystad said.
Research by Rystad Energy shows that more than 35 gigawatts of solar PV and more than 2,000 gigawatt hours of battery cell production capacity could be cut if electricity prices do not return to normal levels soon.
These production processes require energy and have caused some operators to temporarily close or abandon their production facilities, while also increasing the cost of doing business.
And Rystad warned that if prices don't change soon, Europe's plans to reduce its reliance on imported fossil fuels by increasing installed renewable energy capacity and electric vehicle (EV) use could be derailed.
© IntelliNews"Rising energy prices not only pose a significant risk to Europe's decarbonisation efforts, but could also lead to increased dependence on foreign production, which governments want to avoid," said Odun Martinsen, chief scientist of energy services at Rystad Energy. "Creating a reliable, low-carbon supply chain is essential if the continent is to achieve its goals, including the REPowerEU plan, but as it stands, it is at great risk."
REPowerEU is a plan starting in 2022 to rapidly reduce Russia's dependence on fossil fuels and accelerate the green transition. Russia invaded Ukraine in February.
Rystad said electricity prices in Europe have hit unprecedented levels in recent weeks due to unplanned outages at nuclear and hydropower plants, demand for cooling during intense summer heat and cuts in gas supplies from Russia.
Average daily electricity prices in Germany, Europe's leading producer of solar panels and batteries, exceeded 600 euros ($592) per megawatt hour, and in France 700 euros per megawatt hour.
Rystad warned that electricity prices in Europe would rise to 1,500 euros per megawatt hour during peak hours, an unsustainable level for consumers, including the industrial sector. Although prices have fallen significantly from their August highs, prices remain between €300 and €400, many times higher than pre-energy crisis standards.
Rystad noted that in recent years, Europeans have used reliable and affordable electricity. Rystad said low-carbon producers also plan to increase production capacity by about 50 euros per megawatt hour with stable energy prices.
Rystad said that while Europe's solar generation capacity is relatively modest globally (only 2% of total capacity), the shutdown or cancellation of any project would have significant long-term negative consequences.
The European Union is trying to increase its domestic production capacity. The European Union has set a target of 20 gigawatts of generation capacity by 2025, and while 35 gigawatts of projects are currently planned, many of these have not secured funding, Rystad said in a research note, increasing the risk of these projects failing. if high energy prices are maintained.
Electricity costs in Norway have increased sixfold, prompting the energy-intensive solar panel industry to consider shutting down by 2022.
Rystad predicted that since Europe will suffer several years of gas shortages and therefore high electricity prices are expected to continue, it may be difficult to attract financing and investment for solar plants.
In turn, the production of battery cells, central to the electric vehicle supply chain and battery storage, consumes more energy than solar production, and Europe is a major global player.
Rystad noted that the EU currently has 550 GWh of battery cell production capacity, which is 27% of global operating capacity.
Announced development plans will significantly increase this total, increasing capacity by 2.7 TWh, making the EU the world leader, Rystad continued. However, these products are now at risk and as a result the car manufacturing and battery storage industry may find it difficult to obtain European-made batteries.
For example, British Volt's giga-scale battery factory in Blythe, UK will add 30 gigawatt hours to the continent's production capacity. It has already been postponed until mid-2025 due to rising energy costs and the need to raise additional funds.
With energy prices falling for Chinese producers, European producers' plans to rapidly ramp up production may be called into question. Rystad concluded that there could be a slowdown in EV adoption in Europe, depending on how long energy prices hold up.
