Sunday, November 24, 2013

Lessons: tough times for European utilities

"With environmental levies for renewables subsidies rising in line with the ongoing build-out, consumers will be hit with both higher prices and a decline in reliability."

Nothing new to readers of this blog, but Platts' Barrel Blog attacks the subject of variable renewable energy sources impacting markets with vigor

Energy Economist: tough times for European utilities may have a lesson for the US « The Barrel Blog:
There has been talk in the United States of the utility “death spiral,” a process in which environmentally-targeted subsidy support enables consumers to disengage, partially if not wholly, from the electricity grid through demand-side management and distributed generation. Utilities, required to invest to incorporate renewables into a centralized system, are left in an unsustainable situation of higher embedded costs and fewer customers.
Negative pricing is just the visible tip of the iceberg. No region in the US has the same solar PV concentration as Germany, where over 30 GW of capacity has been installed, but when they do, they too are likely to see traditional pricing relationships turned on their head. Peak demand arrives, but peak pricing is gone. Peak and baseload prices are compressed. Storage plants become uneconomic. Scarcity rents — those extreme highs in pricing on which peaking plant profits depend — decline in size and frequency, a situation known in Europe as the “missing money”.
The green dream in Europe has meant the addition of massive variable generating capacity to zero-growth markets. The upshot is that existing investment in thermal plants can no longer survive. The death spiral is a mere cold by comparison. ...
...average gas-fired plant utilization rates dropped to 11% in Spain in first-half 2013 and to less than 21% in Germany in 2012. The International Energy Agency says gas plants need a utilization rate of 57% to be profitable.
Read the entire article at The Barrel Blog

1 comment:

  1. The fight over the allocation of fixed utility costs between consumer classes with and without load-displacement generation will be messy, and as the German utilities are experiencing -- damaging to utilities. Non-self generating customers have already lost a few rounds in Ontario. However, the benefits of interconnection are so great for self-generators that, so long as non-self generating customers can organize themselves in some reasonable way, the self-generating classes will pay more of their fair share.