Europe's transition to green energy faces obstacles

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In 2024 energy prices across Europe fell to a record number of hours below zero. Accelerated construction of wind and solar farms flooded Europe's grids at peak production times, causing excess power to be sold at a loss in increasingly frequent increments for a total of 7,841 hours in the first eight months of the year.

Rapidly expanding solar capacity is the main culprit of price inversions but wind farms also play a large role. This fact was underlined in the Danish offshore wind auction which did not receive a single bid. This is a clear sign that the wind energy market in the Nordic countries is currently largely saturated. Last year, Denmark generated 58 percent of its electricity from offshore wind setting a world record.

The expansion of thousands of wind turbines over the past two decades has discouraged investors from supporting new renewable development in the country because rock-bottom electricity prices offer little return. At the same time, doubts are growing about what demand will be like in the future, as a number of energy-intensive green industrial megaprojects in the north are delayed or canceled altogether.

The offshore wind industry has been struggling globally for several years. Complications in the supply chain and rising operating costs have caused quite a few projects to stall. In the US project costs have risen by an incredible 57 percent in the years since the pandemic which has been a major obstacle for investors.

The rise of clean energy in Europe is good news for the climate but ultimately destabilizing for European energy markets. A cottage industry has grown up around trading the price fluctuations of renewable energy sources. In Denmark companies use automated trading desks to buy and sell huge volumes of energy contracts based on forecasted weather conditions. These will subsequently affect the consumption of electricity on the one hand and the production of renewable energy on the other.

Source:Oilprice/Editorial