The accelerated expansion of renewable energy across Europe is starting to create what Nicolas Kyriakoglou, Senior Consultant at Baringa UK, calls “growing pains.” Speaking at the conference “RES market towards maturity”, organized by Energynomics, he underlined that these difficulties “primarily manifest in the curtailment of renewables. We have seen this in Spain of course, but we’re increasingly seeing it in countries even such as Germany, Poland, Italy and so on.”
Taking Greece as a reference, Kyriakoglou noted that “Greece curtailed last year 3.8% of available renewable energy and this year we have already reached 8.4%”, which was a much steeper increase than many were expecting. Another point to focus on is one that was kind of the mantra: “the summer is going to be safe”. “But this year proved that the summer is not particularly safe with July curtailing 13% of renewable energy.” He added that in some cases “in April we saw specific projects getting curtailed up to 30%.”
The consequences are far-reaching. “Of course, if you’re not metered, you’re not paid. This is putting renewable investors at risk, especially leveraged projects with specific prominence around the PPA. And generally it is risking economy-wide decarbonization if you believe that this could slow down the buildout of renewables for some time.” Beyond PPAs, he stressed, “it’s not just PPAs that are impacted, [but also] merchant projects and CfDs.”
Curtailments also reshape price dynamics. “As we get a deeper duck curve, [thermal assets] run during the day often at close to zero prices or very low prices, which means that they need to recuperate some of their costs in the evening peak. And this is something that we saw last year, especially across Eastern Europe”, he explained. This is a situation which impacts suppliers, but also consumers, and it also “creates cost to the TSO that either directly or indirectly are passed to the consumer”. And all this closes with political pressure: “often, you know, rush decisions result in unintended consequences”, Nicolas explained.
Romania, he acknowledged, has a stronger position. “Romania has done quite well in deploying battery storage projects, better than Greece has which is zero at the moment. But… the growth of renewables is still significant… we expect capacity to pretty much double both across wind and solar by 2030.”
What would be helpful
To manage these risks, Kyriakoglou pointed to governance and transparency. “It’s a very positive thing that, for example, the grid fees were eliminated. But we would argue that to have strong investor confidence in TSO and regulator interventions, there needs to be more and more coordination between regulator, TSO, DSOs and the market, between what is desirable, what is feasible and what is necessary.” Transparency is also key: “to create true long-term investment signals… we need more transparency, whether that is on grid congestions, voltage levels, reactive power needs, and also long-term system needs projection. What balancing do we expect to need in 5 to 10 years’ time? What services?”
Looking ahead, he urged Romania to consider “fast response or capacity market,” and to recognize the importance of storage. “Investors want to plan ahead beyond two, three, four years, but more in the 10-year horizon. So let’s plan ahead about long-duration energy storage. Let’s start to think about if there is a need for a capacity market and if we can mark storage as strategic investments to allow the fast track of development.”
The conference “RES market towards maturity” was organized by Energynomics with the support of our partners: Elektra Renewable Support, APERS, Baringa, CJR Renewables, Enery, Eximprod, Gotion, Huawei, Nordestina, Nova Power & Gas, Prime Batteries Technology, Sermatec, Sunotec, Voltika, Wiren.