The global impact of renewables on energy prices: a look around Europe
Mark Ursell, Lead Portfolio Manager for npower Business Solutions, on some of the ways other European countries are taking on the challenge of decarbonising their energy systems – and how closer co-operation is often key to more secure and affordable energy
The renewable energy landscape has seen a massive transformation over the recent decades. In the UK, we’ve seen substantial investments in renewable sources such as wind, solar and hydro, with the aim of decarbonising the energy grid and driving down carbon emissions.
Latest government policies are designed to drive towards a cleaner energy system by 2030 and to reach these ambitions, over the next five to six years we will need to see a five-fold increase in flexibility in the system, a four-fold increase in the number of battery storage units hooked up to the grid, alongside significant growth in wind and solar.
Did you know, E.ON built its first wind farm back in 1991 and today we provide a range of sustainable energy solutions for homes, businesses and entire communities. You can find out more about our renewables legacy here.
This shift in energy generation has had ripple effects on wholesale energy prices. As we continue into an era of green energy, it’s not just the UK feeling these impacts – renewable energy's influence on power markets is a global phenomenon.
Here we take a closer look at some of the effects of renewable energy investments across different countries and regions.
A renewables powerhouse: Germany
Germany stands out as one of Europe’s leading examples of a country committed to the renewables revolution. Having shut down its last nuclear reactor some years ago, Germany has doubled down on renewable energy generation and now boasts one of the largest solar fleets in Europe, far outstripping other nations in solar capacity.
However, like many other countries, Germany faces the challenge of intermittency – the unpredictability of renewable energy generation, for instance when the sun doesn’t shine or the wind doesn’t blow.
These challenges pose a problem for grid operators in maintaining stable power supplies. As a result, while Germany is generating an incredible amount of renewable energy, it still faces hurdles in integrating that energy into the national grid.
The silver lining is that Germany has strong connections with its European neighbours, including France and Denmark. These interconnectors allow power to be shared across borders when renewable output is low, helping to mitigate some of the issues caused by intermittency. The locations of solar and wind farms near where the power is needed also means energy production is closer to demand centres which reduces the need for expensive grid upgrades.
This is very different to the UK where offshore wind farms are mostly located far from major cities and areas of high power demand.
France’s nuclear legacy
In contrast to Germany, France has a very different approach to energy generation. With its legacy nuclear fleet, France has built up one of the largest nuclear power industries in Europe – its fleet is nearly ten times the size of the UK's.
Nuclear power provides the country with a significant portion of its energy, and it plays a key role in the European energy landscape. The French nuclear fleet provides low-cost, carbon-free baseload energy, which helps to keep electricity prices down not only in France but via interconnectors to neighbouring countries including the UK.
As a result, France consistently enjoys lower energy prices than the UK. This cheaper baseload energy offers stability to the French grid and ensures a steady supply of electricity. In comparison, Germany’s renewables, despite their capacity, are still not fully dependable in terms of providing baseload energy, leaving the country reliant on external sources or backup energy systems to meet demand during times of low renewable output.
Norway: the hydro giant
Norway provides a fascinating example of how geography and foresight can shape a country’s energy future. With 80% of its energy coming from hydroelectric power, Norway is an outlier in Europe. This abundance of hydro power has been a result of more than 100 years of investment in hydropower infrastructure. In addition, Norway is also a significant exporter of natural gas, providing a reliable energy source to countries like the UK – and a source of revenue back to Norway.
The scale of Norway’s renewable energy capacity, particularly from hydroelectric plants, has allowed the country to maintain consistently low energy prices. As with Germany, intermittency isn’t much of an issue here – water flow is a more predictable source of energy. And with their strong hydropower system, Norway provides a reliable, low-cost source of energy to its neighbours, especially during times when renewable generation is low elsewhere.
The need for greater interconnection
One key takeaway from these diverse approaches to renewables is the critical role of energy interconnection. As we move toward a future powered by renewable energy, it's clear the more interconnected countries become, the better they will be able to manage intermittency and fluctuations in energy production.
Germany benefits from strong links with countries like France and Denmark, allowing them to share renewable energy when needed. The UK, too, is beginning to invest more in interconnectors, which could help reduce reliance on fossil fuels and ensure a more reliable energy supply.
Energy interconnection is no longer just a luxury; it’s a necessity in the transition to a low-carbon future. By improving these connections, countries can ensure more stable energy prices, greater energy security, and a smoother integration of renewables into the grid.
A global transition
As we look to the future, it's clear that decarbonisation and renewable energy are not just UK-centric issues – they’re global challenges.
Countries like Germany, France, and Norway each offer unique examples of how renewable energy investments are shaping wholesale prices and energy systems. The journey toward a greener energy grid is full of opportunities, but it also requires overcoming the challenge of intermittency and ensuring that energy systems are flexible and well-connected. With the right investments in infrastructure and cross-border cooperation, we can navigate the complex world of renewable energy and build a more sustainable, affordable energy future for all.
:: A huge 80% of larger business customers surveyed for npower’s Voice of Generators 2024 report found independent energy generators will play a vital role in the low-carbon transition by helping the UK achieve its energy security and net zero ambitions. You can read more in the link in the text above.