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Why electricity utilities are terrified of the success of solar

photo of Michel Bauwens

Michel Bauwens
12th April 2012


Excerpted from Bill St. Arnaud, who summarizes this article:

(go to the original for the graphs)

“Here is a pair of graphs that demonstrate most vividly the merit order effect and the impact that solar is having on electricity prices in Germany; and why utilities there and elsewhere are desperate to try to reign in the growth of solar PV in Europe. It may also explain why Australian generators are fighting so hard against the extension of feed-in tariffs in this country.

The first graph illustrates what a typical day on the electricity market in Germany looked like in March four years ago; the second illustrates what is happening now, with 25GW of solar PV installed across the country. Essentially, it means that solar PV is not just licking the cream off the profits of the fossil fuel generators – as happens in Australia with a more modest rollout of PV – it is in fact eating their entire cake.
Both graphs were published last week on the website Renewables International, and were sourced from EPEX, the European power price exchange. The first graph, from 2008, shows peaking power prices rising to around €60/MWh and staying there for most of the day, with some visible peaks around noon and the early evening – the size of which would depend on the temperature and the usage.

The second graph shows a brief leap to €65/MWh around 9am, before the impact of solar PV takes hold – erasing the midday peak entirely and leaving only a smaller one in the evening. The huge bite out of day-prices is also a bite out of fossil fuel generators’ earnings and profits. Note that the average peak price in the second graph is barely higher than the baseload price.

Deutsche Bank solar analyst Vishal Shah noted in a report last month that EPEX data was showing solar PV was cutting peak electricity prices by up to 40 per cent, a situation that utilities in Germany and elsewhere in Europe were finding intolerable. “With Germany adopting a drastic cut, we expect major utilities in other European countries to push for similar cuts as well,” Shah noted.

Analysts elsewhere said one quarter of Germany’s gas-fired capacity may be closed, because of the impact of surging solar and wind capacity. Enel, the biggest utility in Italy, which had the most solar PV installed in 2011, highlighted its exposure to reduced peaking prices when it said that a €5/MWh fall in average wholesale prices would translate into a one-third slump in earnings from the generation division.”

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One Response to “Why electricity utilities are terrified of the success of solar”

  1. Øyvind Holmstad Says:

    Still, even with solar PV we will face enormous problems with continuous growth, so without de-growth we will all burn!

    “Before we tackle that, we’re too close to an astounding point for me to leave it unspoken. At that 2.3% growth rate, we would be using energy at a rate corresponding to the total solar input striking Earth in a little over 400 years. We would consume something comparable to the entire sun in 1400 years from now. By 2500 years, we would use energy at the rate of the entire Milky Way galaxy—100 billion stars! I think you can see the absurdity of continued energy growth. 2500 years is not that long, from a historical perspective. We know what we were doing 2500 years ago. I think I know what we’re not going to be doing 2500 years hence.”: http://www.energybulletin.net/stories/2012-04-11/exponential-economist-meets-finite-physicist

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