Europe’s renewable energy capacity is set to triple by 2050, but the EU will still miss its climate targets, a report by Aurora Energy Research (ResMOR) shows.
The risk factors will be negative prices, market saturation and grid congestion – with Greece, Romania and the UK most at risk of renewable energy market saturation affecting project development.
Over the past decade, Europe’s renewable energy capacity has grown to over 528 GW, driven by growing energy demand, support policies, higher commodity prices, the phasing out of thermal power plants and improved supply chains. This growth is in line with the EU’s updated Renewable Energy Directive, which raises the 2030 renewable energy target from 32% to 42.5%. To achieve this goal, EU countries aim to add over 600 GW of renewable capacity by 2030, compared to 2024 levels.
Negative prices, market saturation and grid congestion hinder progress
Unprotected renewable assets face increasing risk from negative prices, with Central Europe experiencing the lowest negative prices and the Nordics leading in frequency, according to the ResMOR report. While some countries previously offered protection against negative price hours through subsidy schemes, most now offer little or no protection.
Aurora continues to highlight market saturation as a challenge for renewables, highlighting the need for more energy storage and flexibility, which are yet to be implemented to substantially mitigate price cannibalization.
“Greece, Romania and the UK are most at risk of renewable market saturation affecting investors’ business plans,” the report says.
Grid congestion is another major bottleneck to the expansion of renewable energy. In 2023, Europe saw 57.28 TWh of remediation actions across both renewable and non-renewable assets – a 14.45% increase compared to 2022. Germany, Poland, the UK and Ireland were the most affected, with remediation actions as a share of electricity demand exceeding 4% in these markets and peaking at 9.5% in Ireland, according to the analysis.
Despite these challenges, developers have significant opportunities to reduce risk and unlock value. Key strategies include BESS collocation, portfolio diversification and accessing additional revenues through capacity, ancillary and balancing markets.
“Negative prices and grid constraints pose significant risks to renewable assets in the market today, which will be further exacerbated as more renewable projects are developed. It is vital for developers to explore opportunities to reduce project risk, such as portfolio diversification, to mitigate the impact,” says Rebecca McManus, Renewables Lead, Pan-European Research at Aurora Energy Research.