Intermittent renewable energy in Europe is causing havoc to base-load utilities profitability and introducing economic uncertainty for long term investments in the continent’s electric power.

The problem, as Bloomberg Businessweek explains, is that Europe’s biggest power markets give preference to renewable energy which, from time to time, forces some utilities to cut back on their use of their fossil-fuel plants (coal and gas-fired) or sell the electricity at a loss. That cuts into their profit, complicating investment decisions as the companies try to meet mandatory emission targets and replace older plants and networks.

On windy and sunny days, renewable energy (which cannot be stored) is put into the grid and thereby forces the utilities to unload their base-load power at a loss to get other customers to take it.  This has only become a major problem as renewable energy increases its share of the overall electric grid and grid operators are required to take that power.

With Europe’s wind and solar farms set to triple by 2020, utilities investing in new coal and gas-fired power plants no longer face stable returns. As more intermittent renewables come on line, a gas plant owned by RWE or EON that may cost $1 billion to build will be stopped more often from running at full capacity. It may only pay for itself on days when the Sun doesn’t shine or when the wind is not blowing.

“You’re looking at a future where on a sunny day in Germany, you’ll have negative prices,” Bloomberg New Energy Finance chief solar analyst Jenny Chase said about power rates in wholesale trading. “And a lot of the other markets are heading the same way.”

“The law in Germany is that renewables have priority, so utilities have the choice of turning plants down for a few hours or paying a negative price to someone in Germany or abroad,” EON spokesman Georg Oppermann said in a telephone interview.

Narrower utility profit margins mean it will take longer for companies to pay off building new gas- and coal-fired facilities. Those plants are essential as they can run 24/7, preventing blackouts when the Sun and wind are not producing power.

Northern Europe’s renewable-energy plans call for about 200 gigawatts of solar and wind capacity by 2020, or almost a third of the current installed base, compared with about 70 gigawatts today.

Photovoltaic and solar-thermal plants may meet most of the world’s demand for electricity by 2060 — and half of all energy needs — with wind, hydropower and biomass plants supplying much of the remaining generation, the International Energy Agency said in August.



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