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(Bloomberg) — Europe is on track to miss its 2030 targets for clean energy as increasingly frequent bouts of negative prices discourage investors from backing new projects, according to market analytics firm Aurora Energy.
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European Union solar and wind capacity will rise to about 850 gigawatts by 2030, according to Aurora analysts, falling short of the goal for around 1,100 gigawatts set out by national energy and climate plans. Outdated subsidy schemes are partially to blame, they said.
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“A few years ago governments flooded the markets, made it very very attractive to roll out renewables,” said Jannik Carl, an analyst at Aurora Energy. “Now people have realized that because we have liberal markets this causes renewables to act unreasonably.”
On the sunniest or windiest days, electricity can flood the grid, which causes prices to turn negative and users can be paid to consume. However, because of how subsidies work for renewable generators, some are incentivized to keep producing even when prices drop below zero, further distorting the market. Experts are calling on governments to adjust these mechanisms and help reduce the phenomenon of negative prices.
“It doesn’t make sense to subsidize photovoltaic production to the point where you just drown in summer PV electricity,” said Christoph Brand, chief executive officer of Swiss energy producer and trader Axpo Holding AG. “In different countries, you still have incentives which are not geared towards a more differentiated build out of PV, so irrespective of when you produce, you get subsidized.”
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Negative prices have created a profitability issue for many renewable projects, he added.
Last year, Europe’s power markets saw record periods of negative prices after a rapid expansion of wind and solar capacity boosted generation. Germany saw a 60% increase compared to a year earlier, reaching 468 hours, according to data from Epex Spot. In France, below-zero hours more than doubled to 356.
Grid congestion is also a factor which is holding back the roll-out of renewables, according to Aurora Energy. Curtailment, when energy generation has to be halted due to a lack of infrastructure to bring it where it’s needed, is affecting the UK and Germany the most. That’s making it difficult to build more capacity, especially in the case of wind, as turbines are typically further away from centers of demand.
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