01.03.2024
Source: Energy & Management Powernews
Electricity prices in Europe fell back to pre-crisis levels in 2023. The consulting firm Enervis has investigated the reasons for this.
In the "Renewable Power Market Update 2024", the Berlin-based consulting firm Enervis analyzed the European wholesale electricity market. The background to this is the price decline in 2023: "Electricity prices returned to pre-crisis levels, with base prices falling by an average of 58 percent," the study states. It shows that the decline in electricity prices was caused by several factors.
One main factor was lower gas prices, which influenced the market and contributed to a general price reduction. In addition, weak demand for electricity and improved availability of French nuclear power plants put pressure on prices. Last but not least, the increase in renewable energies also played a role, as these contributed to a greater diversification of the energy mix.
"Lower base prices also led to lower market values for renewables, especially PV," the report continues. The continued expansion of renewable energies will "significantly affect the economic profitability of these projects in the medium term through cannibalization".
Negative electricity prices of minus 500 euros
Another phenomenon in 2023 was the negative electricity prices on the wholesale markets, which once again occurred in many European countries and even reached record highs. These are due to the increased expansion of renewable energies and lower demand. This development shows the importance of flexibility options to dampen price volatility and ensure a stable market situation.
In terms of the strategic importance of these results, it should be noted that volatile market conditions increase uncertainty for investors and market players. Managing these fluctuations will be crucial for market participants and regulators alike, according to the study.
Symptoms of this are negative electricity prices on the exchanges: "In some countries, prices even fell to minus 500 euros in 2023."
The future of the European electricity market depends on a variety of factors, including the development of fuel prices, the development of demand and the share of renewable energies in the electricity mix, according to the study. The expansion of renewable energies through auctions is expected to put pressure on long-term electricity market revenues, while flexible demand options could help stabilize prices and revenues.
The Market Report 2024 from Enervis can be requested free of charge from the consultancy.
Author: Stefan Sagmeister
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