This year has the potential to be “record-breaking” for renewables auctions in Europe, according to Wood Mackenzie.
As the race to meet 2030 targets begins, there will be 45GW of capacity put up for grabs across Europe, researchers believe.
Wood Mackenzie senior research manager Rory McCarthy said that is “a significantly higher total than those targeted in recent years”.
The total consists of 17GW of wind and 6GW of solar PV, with the remainder of auctions being either technology-neutral or applying to several sources, highlighted the market analyst outfit.
Previous auction outcomes highlight that there is no guarantee the targeted volumes will be achieved – over the past three years, European auctions have seen an average award rate of 70%, the analyst outfit found.
“If this same level of success is achieved in 2021, we could see upwards of 30GW of capacity awarded,” McCarthy said.
Wind and solar PV will represent a “vast majority” of capacity procured in 2021, while the non-dispatchable nature of these technologies presents a flexibility challenge to power systems.
The analyst outfit highlighted this has already started to manifest in several markets, with negative day-ahead and intra-day power prices occurring during periods of high non-dispatchable renewable generation and low demand.
Coronavirus-related demand issues aside, the frequency of negative prices are expected to increase.
“This raises the question: are policymakers aware of the flexibility challenge ahead? While negative prices should receive much greater focus over the coming year, we think price signals alone are unlikely to trigger new investment in much-needed flexible resources,” said McCarthy.
Once government restrictions are eased and industrial activity recovers in 2021, Wood Mackenzie predicted power demand will return, to support higher prices.
“In the absence of major additions of flexible resources, supply pressure in 2021 will be determined by the availability of existing generators and the scale of thermal plant closures.
“The ability of Europe’s power systems to cope with the winter’s challenges will be a significant indicator of future flexible supply requirements and overriding policy direction on matters of system security and reliability,” added McCarthy.
Balancing and day-ahead markets will see further harmonisation, while the build-out of HVDC interconnectors in 2021 will continue, the analyst stated.