Trends in the renewable energy market – insights from our Horizon Europe SOLARX experts

8th October 2024 at 12:49 pm

Between 2005 and 2022, the share of energy consumed in the EU that was generated from renewable energy sources increased from 10.5% to 22.5% (EEA). Despite this substantial growth, there remains a significant gap to reach the EU’s target of 42.5% by 2030. Wind and solar energy are amongst the key scalable technologies for achieving the EU targets. Despite many advanced technologies available, this will still require substantial research and technological innovations. Horizon Europe’s Cluster 5 (CL5), Climate, Energy and Mobility, and other EU funding instruments provide substantial resources for research and innovation in the field of renewable and sustainable energy generation to accelerate the ongoing energy transition.

We asked two experts from the Technical University of Denmark (DTU), project partners in the Horizon Europe CL5-funded SOLARX project, about their views on the medium- to long-term trends in the European energy market. Dr. Matti Juhani Koivisto is a senior researcher focusing on integrating wind and solar energy solutions into energy systems and Dr. Kaushik Das is an associate professor with a research focus on renewable hybrid power plants and power system balancing. Their perspective is focused on the European market and provides an outlook on renewable energy systems as a key part of the European Green Deal.

Overview, future trends, and challenges in the European renewable energy market

How do you foresee the renewable energy market evolving towards 2050 and what major factors (e.g., policy, technology, or cost trends) will shape the renewable energy market in the coming decades?

Matti: Solar generation has grown strongly and after some slowdown, wind installations are also increasing again. We see both solar and wind energy growing significantly towards 2050, with solar generation gaining an increased share also in Central to Northern Europe as solar investment costs are projected to decrease significantly. The main drivers are increased electricity demand due to electrification and political targets to reduce emissions. Land availability, permitting, and grid bottlenecks are significant challenges, especially to building wind onshore which is expected to push more wind installations offshore. Although out of my research field, geopolitical issues may be impacting cost in the future, e.g., regarding where solar panels and wind turbines can be purchased from.

With the increasing penetration of wind and solar energy, how significant do you expect the challenges of electricity price variability and self-cannibalisation to be?

Matti: As wind and solar generations increase, the amount of very low, or even negative, price hours is expected to increase. On the other hand, as gas power plants get decommissioned or at least less utilised, the cost of energy generation at times when wind and solar generation are low, is expected to increase. This is driven by increasing CO2 taxes, to drive the lesser use of fossil fuels. Gas power plants need to get a higher price from the few hours of the year when they operate to cover their costs. These drivers lead to increasing price variability, even though we expect the mean electricity price to decrease as the low operational costs of wind and solar generation drive prices on most hours of the year.

The increasing price variability can be mitigated by increasing flexibility in the power system, coming from increasingly flexible demand, such as smart-charging EVs and heat pumps connected to heat storage. The growing flexible demand can start to surpass the impact of growing variability in the supply side after 2030, stabilising or even decreasing the price variability, but this development is still quite uncertain.

Kaushik: Self-cannibalisation is expected to increase, especially for solar PV, as the day-night pattern appears in all parts of Europe at similar times. Flexibility at system level can mitigate the price variability, but at plant-level the developers can also use storage to optimise when to sell to the market. Revenues from other energy vectors, such as heat or hydrogen, are also potential ways to mitigate self-cannibalisation.

Advanced energy storage systems and SOLARX technologies in the evolving renewable energy market

How critical is the integration of storage technologies (e.g., battery systems) and what advancements in storage technology will be key to maximising revenue streams from renewable energy systems by 2050?

Matti: As discussed before, storage technologies are expected to have a major impact on how price variability develops at the system level. Cheap storage options can drive lower price variability, and vice versa. On the system-level, hydro power and heat storage are expected to play a major role in long-term storage, with hydrogen storage also potentially having an impact if the hydrogen economy develops. Electric batteries, also as part of EVs, have a major role in intra-day storage and in balancing day-to-day markets. For optimising revenue at wind and solar plant-level, electric batteries are perhaps the most used at this point, especially globally in connection to solar generation to mitigate the diurnal variation.

Kaushik: Day-ahead market participation can be optimised using a battery, but most revenue may be found from intra-day and balancing markets where the battery’s capability for high power output, but limited energy, may be best suited to. The expected continued cost decrease in electric batteries is important for driving battery investments, but other energy vectors may also provide opportunities. With heat production, and in the future hydrogen production, incorporated on plant-level, the flexibility options from sectors other than electricity may provide interesting new options for revenue maximisation. Additionally, the grids are getting congested all around the world. In such systems, it is difficult to accommodate more renewable energy sources without grid reinforcement. However, grid reinforcement is a time-consuming and expensive affair. Co-locating multiple renewable energy technologies like wind and solar power behind a single grid connection point (typically called hybrid power plants) has the potential to integrate higher volumes of renewable generations, especially considering the anti-correlated nature of such technologies.  However, this might lead to a higher amount of curtailment especially when both types of renewable generations are producing. Storage technologies can reduce the curtailment and make these projects economically feasible. Storage also has the potential of reducing penalties owing to forecast errors and increasing revenue through energy arbitrage, as previously mentioned, for hybrid power plants.

In your opinion, what key opportunities do you see for SOLARX in the evolving renewable energy market towards 2050?

Matti: I believe SOLARX has unique opportunities to link the flexibility options from multiple energy vectors. Either by utilising storage, or linking to local flexible demand, the capability to optimise the operation of SOLARX plant in electricity, heat and hydrogen production is a very interesting opportunity to manage the increasing self-cannibalisation challenge of traditional solar photovoltaic generation. Related perhaps to my focus on studying the energy system as a whole, I think assessing SOLARX in a range of future European energy system projections towards 2050 is important. As price variability and self-cannibalisation are expected to increase, the benefits of SOLARX, although potentially less in the current electricity markets, can become pronounced when looking at pathways to reach the emission reduction targets toward 2050. The grid bottleneck issues can favour the potential placement of SOLARX close to demand.

accelopment as a Green Deal project partner

We at accelopment have been a reliable cooperation partner for numerous research and innovation projects with a focus on the European Green Deal, especially across the energy-mobility interface. With our long-standing experience with successful climate, energy and mobility proposals such as SOLARX, PEPPERONI and ROADVIEW, we can guide you in preparing an innovative and competitive project application.

We have identified several forthcoming call topics that are relevant to the topics discussed in this interview and to the European Green Deal in general. An exhaustive overview was presented in previous blog posts and we here provide a selection of the most relevant call topics, all with a submission deadline of 4 February 2025:

We look forward to hearing about your project ideas. For questions on how we can further support you, please contact our Green Deal experts.

Dr. Jörn-Frederik Wotzlaw
Research & Innovation Project Manager

Dr. Johannes Ripperger
Research & Innovation Manager