Finnish technology group Wärtsilä says Europe is now seeing a situation that was only expected to happen years down the line, in terms of coal generation capacity decreasing and renewable generation capacity increasing in the respective countries’ energy systems.
Wärtsilä energy business development director Matti Rautkivi says there was a strong suspicion that the European energy system could not handle more than 50% of renewable generation capacity, but this has been disproven, with the renewable generation share of the energy system having grown to an average of 54% to 59% across the continent over the first five months of this year.
Wuppertal Institut future energy and industry systems director Stefan Lechtenböhmer points out that Europe is showing the rest of the world how easy it can be to get onto the renewables train.
He explains further that electricity market price volatility has increased in the “Covid-19 period” – the first five months of the year – which has created an opportunity for flexible generation and storage.
The Wärtsilä Energy Transition Lab shows that combined cycle gas turbine profitability is down 36% from January 1 to May 9, while coal generation is making a loss difference in the UK.
The energy transition lab on the company’s website is a free-to-use data platform developed to help the industry, policy makers and the public understand European electricity markets and plan for a future with a significantly increased level of renewables.
In contrast to the UK, Germany’s combined cycle gas turbine profits show a positive development, which can to a large extent be attributed to heavily reduced gas and carbon dioxide prices, making cyclic operation feasible.
However, flexible assets have increased their profits from day ahead and intraday markets by a staggering 471% for the first five months of the year.
“It stands to reason that flexibility is being rewarded and that there is an unprecedented opportunity in the European markets for very flexible plants right now – a trend that predicts well for a faster energy transition.
“The Covid-19 pandemic has given us a glimpse into that future, with the global lockdown causing a decrease in energy demand and leading to a significant increase in renewable penetration,” says Wärtsilä energy business VP for Africa and Europe Björn Ullbro.
The energy transition lab shows that, on average, coal generation in Europe has been down between 31% and 48% year-on-year over the Covid-19 period.
Lechtenböhmer says it is key that the market does not fall back to pre-Covid-19 levels of generation capacity, but keep the energy transition going. He believes that this is possible, as Europe is making the energy transition central to its recovery plans.
Rautkivi says the market has provided a learning opportunity over the past five months; flexible gas and energy storage has been making more money than ever in this volatile environment.
“It is all about integration [in the energy system], which calls for continued investment in renewable energy.
“The market is helping the business case for more flexible systems. There is a lot of capacity that is not valuable anymore in a future system,” Rautkivi adds.
Rautkivi concludes by pointing out that Europe now knows it needs more renewables in the system, that inflexibility is not providing value – but actually diminishing it – and that flexibility gives the renewable grid value.