On August 1, a group of solar and renewable energy associations told the European Commission that the European Union should take action to prevent negative prices that destroy the potential of solar energy and affect project revenues.
Europe's solar industry is growing rapidly, with 40 gigawatts (GW) installed in 2022, nearly 50% more than in 2021.
"However, 2023 could bring another record summer for solar production," the unions warned in a letter to EU Energy Commissioner Kadri Simson, citing grid problems, system inflexibility and price volatility affecting the projects. .
“The energy and climate crises are forcing us to increase the use of solar energy to an unprecedented level. Action is needed more than ever to accelerate the growth of solar energy and limit energy waste," wrote 19 associations, 16 of which represent the industry in EU countries. Other signatories represent the entire European Union, such as Norway and Switzerland.
Discounts and negative prices
A major challenge for the industry is that solar power is increasingly being taken off the grid during times of low demand, sometimes in favor of highly polluting coal-fired power generation.
This year, EU countries, notably Poland and the Czech Republic, shut down solar generation due to an unexpected drop in demand as coal-fired power plants continued to be built.
"Reliance on so-called 'baseload' and a lack of flexibility in clean systems leads to high-emission coal burning and wasted clean and cheap solar energy," the joint letter said.
At the same time, the industry warns that volatile energy prices and "too often" negative prices are putting investment in new solar assets at risk.
"High price volatility, exemplified today by price increases or negative prices, will become the new normal," the associations said, meaning greater uncertainty and potential loss of revenue from renewables.
Grids must be ready for more renewable energy
Many solutions to this problem have already been proposed in the 2018 EU legislation to increase the production of energy from renewable sources. However, this has not been properly implemented in many EU countries. .
To help solve the problem, the associations call on EU countries to increase network readiness and speed up the licensing and creation of network infrastructure.
They say that with the expected boom in renewable energy, grids cannot wait and must start developing with the expected investment.
Electricity systems also need to be resilient, from adapting networks to making households more sensitive to price signals. At the same time, Europe needs additional storage capacity and incentives to use electricity when demand and therefore prices are low, such as at night.
The associations also called for regulatory hurdles and double burdens to be eliminated when dealing with hybrid projects that combine solar generation with other generation sources, such as storage or wind power.
At the same time, investors need to get the right signals and know that solar investments are sustainable in the long term, associations say.
This can be done through contracts for difference, which provide a guaranteed return on renewable energy and were proposed by the European Commission in March 2023 as a way to stabilize fluctuations in energy prices in the electricity market.
However, they warned against another potential component of the reform - an extension of the controversial cap on electricity generation revenues - saying it "risks further depriving commercial solar of the extra revenue that offsets periods of low revenue".
Solar growth in Europe is expected to continue this decade. The EU has set a target of 600 GW by 2030, which will help offset fossil-fuel electricity generation as Europe seeks to decarbonise and free itself from dependence on Russian energy.
[Editing by Natalie Weatherold]
