Merchant-exposed wind and solar generators are likely to be significantly impacted by falling power prices resulting from the coronavirus pandemic, according to a new study from Aurora Energy Research.
‘Special Report: The impact of COVID-19 on European power markets’, found revenues in the 2020-2021 period for these types of renewable energy power plants are expected to fall 30-50% across several markets.
The analysis covers markets including France, Germany, Great Britain, Ireland, Spain and Italy.
Already day-ahead power prices have fallen by 30-40% in many EU countries, since the COVID-19 lockdown began, said the report.
Aurora’s study found a “mild” COVID-19 scenario would see power prices recovering by 2022, whilst a worst-case scenario would not see a full recovery until 2025.
Assets with a high exposure to market prices will generally be more affected by the COVID-19 pandemic, but this exposure varies between technologies, between existing and new assets, and across countries, said the study.
The report found renewables with contracted contracts-for-difference (CfDs) or feed-in tariffs will be “largely protected” from a reduction in capture prices, such as new generation in France, Ireland and Great Britain.
In countries like Spain, where a large portion of new build is expected on a merchant basis, will be significantly more affected, the study highlighted.
Exposure of energy storage to market prices will depend on their business model. Those with capacity market or longer-term ancillary services will be less affected by decreasing spreads.
The report said system operators would likely need to procure more ancillary services to manage the fall in grid stability.
Aurora found power prices in France are expected to fall 28-35% as a result of COVID-19. In a worst-case scenario power prices will remain 20% lower by 2025. Profitability will likely fall for most assets with merchant renewables most affected, with profits 20-44% lower.
Storage assets in France are less affected, with profits 11-34% lower, while thermal could see profits 10-31% higher.
In Aurora’s analysis Germany’s power prices are expected to fall 24-45% as a result of COVID-19 and will remain 22% lower by 2025 in a worst-case scenario. Merchant renewables are the most affected, with profits 17-53% lower.
Energy storage is less affected, with profits 13-30% lower, while thermal assets, especially gas generation, gaining profits as fuel costs decrease.
Power prices in Great Britain are expected to fall 25-45% and will remain 25% lower by 2025 in a more depressed scenario, said the report. Again, merchant renewables are expected to be the most affected, with profits 20-45% lower.
The study found thermal and energy storage are less affected, with profits 5-29% lower.
In the Republic of Ireland power prices are expected to fall 27-50%, remaining 25% lower by 2025 in a worst-case scenario. Merchant renewables are the most affected, with profits 21-47% lower.